UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2000

                         Commission File Number: 1-15607

                      JOHN HANCOCK FINANCIAL SERVICES, INC.
                Exact name of registrant as specified in charter

            DELAWARE                                     04-3483032
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                               John Hancock Place
                           Boston, Massachusetts 02117
                    (Address of principal executive offices)

                                 (617) 572-6000
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Number of shares outstanding of our only class of common stock as of
November 13, 2000:

                                   315,060,602
<PAGE>

PART I    FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                        September 30,
                                                            2000         December 31,
                                                         (Unaudited)        1999
                                                        -----------------------------
                                                                (in millions)
<S>                                                       <C>             <C>
Assets

Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: 2000--$11,349.5; 1999--$13,448.4) .....   $11,620.0       $13,800.3
   Available-for-sale--at fair value
   (cost: 2000--$15,538.6; 1999--$17,267.7) ...........    15,523.0        17,069.6
Equity securities:
   Available-for-sale--at fair value
   (cost: 2000--$1,077.7; 1999--$1,088.1) .............     1,226.3         1,232.1
   Trading securities--at fair value
   (cost: 2000--$182.2; 1999--$53.8) ..................       226.5            84.1
Mortgage loans on real estate .........................     8,962.5        10,736.4
Real estate ...........................................       538.7           548.5
Policy loans ..........................................       415.8         1,938.8
Short-term investments ................................       143.5           166.9
Other invested assets .................................     1,122.1         1,311.1
                                                          -------------------------

   Total Investments ..................................    39,778.4        46,887.8

Cash and cash equivalents .............................     2,037.1         1,817.9
Accrued investment income .............................       617.1           654.5
Premiums and accounts receivable ......................       236.7           215.6
Deferred policy acquisition costs .....................     2,446.4         3,234.9
Reinsurance recoverable ...............................     1,849.4         1,872.6
Other assets ..........................................     2,151.4         1,724.8
Closed block assets - Note 5 ..........................     9,668.4              --
Separate accounts assets ..............................    27,920.1        28,047.6
                                                          -------------------------

   Total Assets .......................................   $86,705.0       $84,455.7
                                                          =========================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       2
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                      September 30,
                                                                          2000        December 31,
                                                                       (Unaudited)        1999
                                                                      -----------------------------
                                                                              (in millions)
<S>                                                                     <C>             <C>
Liabilities and Shareholders' Equity

Liabilities
Future policy benefits ...........................................      $22,243.9       $31,106.2
Policyholders' funds .............................................       14,566.4        15,562.3
Unearned revenue .................................................          636.6           490.2
Unpaid claims and claim expense reserves .........................          257.8           358.9
Dividends payable to policyholders ...............................          138.9           472.8
Short-term debt ..................................................          459.1           453.8
Long-term debt ...................................................          543.0           536.9
Income taxes .....................................................          238.9           159.2
Other liabilities ................................................        2,041.8         2,383.2
Closed block liabilities - Note 5 ................................       11,970.5              --
Separate accounts liabilities ....................................       27,920.1        28,047.6
                                                                        -------------------------

   Total Liabilities .............................................       81,017.0        79,571.1

Minority interest ................................................           93.5            93.5

Commitments and contingencies - Note 4

Shareholders' Equity - Notes 6 and 7
Common stock, $.01 par value; 2.0 billion shares authorized; 315.1
   million shares issued and outstanding .........................            3.2              --
Additional paid in capital .......................................        5,087.0              --
Retained earnings ................................................          564.2         4,825.0
Accumulated other comprehensive income (loss) ....................          (59.9)          (33.9)
                                                                        -------------------------

   Total Shareholders' Equity ....................................        5,594.5         4,791.1
                                                                        -------------------------

   Total Liabilities and Shareholders' Equity ....................      $86,705.0       $84,455.7
                                                                        =========================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       3
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                     Three Months Ended       Nine Months Ended
                                                                                        September 30,           September 30,
                                                                                     2000         1999        2000         1999
                                                                                   -----------------------------------------------
                                                                                                    (in millions)
<S>                                                                                <C>          <C>          <C>          <C>
Revenues
  Premiums .....................................................................   $  482.7     $  595.0     $1,743.9     $2,033.3
  Universal life and investment-type product charges ...........................      193.8        172.4        580.0        509.4
  Net investment income ........................................................      795.9        864.1      2,456.5      2,581.0
  Net realized investment gains, net of related amortization of deferred
    policy acquisition costs and amounts credited to participating pension
    contractholders ($4.8 and $6.7 for the three months ended September 30,
    2000 and 1999 and $6.3 and ($93.7) for the nine months ended September 30,
    2000 and 1999, respectively) ...............................................       (2.7)       (63.8)        78.6        178.0
  Investment management revenues, commissions and other fees ...................      180.7        167.6        596.3        504.6
  Other revenue ................................................................        5.3         (1.8)        13.3         11.8
  Contribution from the closed block - Note 5 ..................................       39.4           --         90.7           --
                                                                                   -----------------------------------------------

     Total revenues ............................................................    1,695.1      1,733.5      5,559.3      5,818.1

Benefits and Expenses
  Benefits to policyholders, excluding amounts related to net realized
    investment gains credited to participating pension contractholders ($4.1 and
    $5.1 for the three months ended September 30, 2000 and 1999 and $8.7 and
    ($33.7) for the nine months ended September 30, 2000 and 1999,
    respectively) ..............................................................      976.3      1,155.1      3,184.1      3,600.4
  Other operating costs and expenses ...........................................      377.5        333.7      1,199.2        997.1
  Amortization of deferred policy acquisition costs, excluding amounts related
    to net realized investment gains ($.7 and $1.6 for the three months ended
    September 30, 2000 and 1999 and ($2.4) and ($60.0) for the nine months ended
    September 30, 2000 and 1999, respectively) .................................       48.5         57.5        142.5        145.0

  Dividends to policyholders ...................................................       26.8        114.0        120.5        361.0
                                                                                   -----------------------------------------------

     Total benefits and expenses ...............................................    1,429.1      1,660.3      4,646.3      5,103.5
                                                                                   -----------------------------------------------

Income before income taxes, extraordinary item and cumulative effect of
  accounting change ............................................................      266.0         73.2        913.0        714.6
Income taxes ...................................................................       81.7         28.2        294.6        239.2
                                                                                   -----------------------------------------------

Income before extraordinary item and cumulative effect of accounting change ....      184.3         45.0        618.4        475.4

Extraordinary item - demutualization expenses, net of tax - Note 1 .............         --        (25.9)       (10.2)       (56.6)
Cumulative effect of accounting change, net of tax - Note 1 ....................         --           --           --         (9.7)
                                                                                   -----------------------------------------------

Net income .....................................................................   $  184.3     $   19.1     $  608.2     $  409.1
                                                                                   ===============================================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       4
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

           UNAUDITED CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

<TABLE>
<CAPTION>
                                                    Three Months
                                                        Ended              For the Period      Nine months ended
                                                    September 30,        February 1 through   September 30, 2000
                                                         2000            September 30, 2000         Pro Forma
                                                    ------------------------------------------------------------
                                                                (in millions, except per share data)
<S>                                                     <C>                    <C>                    <C>
Earnings per common share - Notes 6 and 7:

Basic earnings per common share:

Income before extraordinary item ..................     $  .59                 $ 1.78                 $ 1.96

Extraordinary item ................................         --                    .01                   (.03)
                                                        ----------------------------------------------------

Net income per common share .......................     $  .59                 $ 1.79                 $ 1.93
                                                        ====================================================

Diluted earnings per common share:

Income before extraordinary item ..................     $  .58                 $ 1.77                 $ 1.95

Extraordinary item ................................         --                    .01                   (.03)
                                                        ----------------------------------------------------

Net income per common share .......................     $  .58                 $ 1.78                 $ 1.92
                                                        ====================================================

Share data:
Weighted-average shares used in basic
earnings per common share calculations ............      314.8                  314.8                  314.8

Plus: incremental shares from assumed
conversion of non-vested stock and stock options ..        2.2                    1.8                    1.8
                                                        ----------------------------------------------------

Weighted-average shares used in diluted
earnings per common share calculations ............      317.0                  316.6                  316.6
                                                        ====================================================
</TABLE>

The unaudited pro forma information above gives effect to the Reorganization and
Initial Public Offering referred to in Notes 1 and 6.

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       5
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                              Additional                          Other            Total
                                               Common          Paid in         Retained       Comprehensive     Shareholders'
                                               Stock           Capital         Earnings       Income (Loss)        Equity
                                              -------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                           <C>              <C>             <C>              <C>               <C>
Balance at July 1, 1999 ..............        $     --         $     --        $5,061.8         $  134.9          $5,196.7

Comprehensive income:
  Net income .........................                                             19.1                               19.1
  Other comprehensive income,
     net of tax:
     Net unrealized losses ...........                                                             (82.0)            (82.0)
     Foreign currency translation
       adjustment ....................                                                               2.0               2.0
     Minimum pension liability .......                                                              (0.8)             (0.8)
                                                                                                                  --------
Comprehensive income .................                                                                               (61.7)
                                              ----------------------------------------------------------------------------

Balance at September 30, 1999 ........        $     --         $     --        $5,080.9         $   54.1          $5,135.0
                                              ============================================================================

Balance at July 1, 2000 ..............        $    3.2         $5,076.4        $  379.9         $  (98.4)         $5,361.1

Additional paid in capital ...........                             10.6                                               10.6
Comprehensive income:
  Net income .........................                                            184.3                              184.3
  Other comprehensive income,
     net of tax:
     Net unrealized gains ............                                                              55.6              55.6
     Foreign currency translation
       adjustment ....................                                                             (11.6)            (11.6)
     Minimum pension liability .......                                                              (5.5)             (5.5)
                                                                                                                  --------
Comprehensive income .................                                                                               222.8
                                              ----------------------------------------------------------------------------

Balance at September 30, 2000 ........        $    3.2         $5,087.0        $  564.2         $  (59.9)         $5,594.5
                                              ============================================================================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       6
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     AND COMPREHENSIVE INCOME -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                       Accumulated
                                                           Additional                      Other          Total
                                                Common      Paid in        Retained    Comprehensive   Shareholders'
                                                Stock       Capital        Earnings    Income (Loss)      Equity
                                            ------------------------------------------------------------------------
                                                                                (in millions)
<S>                                            <C>          <C>            <C>            <C>            <C>
Balance at January 1, 1999 ..............      $     --     $     --       $4,671.8       $  283.4       $4,955.2

Comprehensive income:
  Net income ............................                                     409.1                         409.1
  Other comprehensive income,
     net of tax:
     Net unrealized losses ..............                                                   (245.2)        (245.2)
     Foreign currency translation
       adjustment .......................                                                     15.9           15.9
     Minimum pension liability ..........                                                       --             --
                                                                                                         --------
Comprehensive income ....................                                                                   179.8
                                               ------------------------------------------------------------------

Balance at September 30, 1999 ...........      $     --     $     --       $5,080.9       $   54.1       $5,135.0
                                               ==================================================================

Balance at January 1, 2000 ..............      $     --     $     --       $4,825.0       $  (33.9)      $4,791.1

Demutualization transaction .............           2.2      3,373.3       (4,869.0)                     (1,493.5)
Initial public offering .................           1.0      1,656.7                                      1,657.7
Additional paid in capital ..............                       57.0                                         57.0

Comprehensive income:
  Net income before demutualization .....                                      44.0                          44.0
  Net income after demutualization ......                                     564.2                         564.2
                                                                           --------                      --------
  Net income for the period .............                                     608.2                         608.2

  Other comprehensive income, net of tax:
     Net unrealized gains ...............                                                      9.4            9.4
     Foreign currency translation
       adjustment .......................                                                    (18.9)         (18.9)
     Minimum pension liability ..........                                                    (16.5)         (16.5)
                                                                                                         --------
Comprehensive income ....................                                                                   582.2
                                               ------------------------------------------------------------------

Balance at September 30, 2000 ...........      $    3.2     $5,087.0       $  564.2       $  (59.9)      $5,594.5
                                               ==================================================================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                              2000           1999
                                                                                            ------------------------
                                                                                                 (in millions)
<S>                                                                                         <C>            <C>
Cash flows from operating activities:
     Net income ......................................................................      $   608.2      $   409.1
     Adjustments to reconcile net income to net cash provided by operating activities:
          Amortization of discount - fixed maturities ................................          (85.9)         (45.2)
          Realized investment gains, net .............................................          (78.6)        (178.0)
          Change in deferred policy acquisition costs ................................         (172.0)        (187.6)
          Depreciation and amortization ..............................................           80.3           55.3
          Net cash flows from trading securities .....................................         (142.4)        (487.4)
          Increase in accrued investment income ......................................          (98.8)        (162.0)
          Increase in premiums and accounts receivable ...............................          (25.1)         (30.3)
          (Increase) decrease in other assets and other liabilities, net .............         (608.5)         120.7
          Increase in policy liabilities and accruals, net ...........................        1,291.3        1,223.2
          Loss on sales of subsidiaries ..............................................             --           21.3
          Increase in income taxes ...................................................          296.6           88.7
          Initial cash transferred to the closed block ...............................         (158.6)            --
          Contribution from the closed block .........................................          (90.7)            --
                                                                                            ------------------------

                   Net cash provided by operating activities .........................          815.8          827.8

Cash flows from investing activities:
     Sales of:
          Fixed maturities held-to-maturity ..........................................             --           57.6
          Fixed maturities available-for-sale ........................................        4,325.0        8,094.5
          Equity securities available-for-sale .......................................          255.3          127.8
          Real estate ................................................................           49.5        1,191.8
          Short-term investments and other invested assets ...........................           24.5          763.5
     Maturities, prepayments and scheduled redemptions of:
          Fixed maturities held-to-maturity ..........................................        1,216.9        1,339.8
          Fixed maturities available-for-sale ........................................        1,149.9        1,486.3
          Short-term investments and other invested assets ...........................          406.6          232.1
          Mortgage loans on real estate ..............................................          956.3          966.3
     Purchases of:
          Fixed maturities held-to-maturity ..........................................       (1,292.9)      (1,935.3)
          Fixed maturities available-for-sale ........................................       (6,232.5)     (12,124.2)
          Equity securities available-for-sale .......................................         (194.4)        (243.8)
          Real estate ................................................................          (48.0)        (160.1)
          Short-term investments and other invested assets ...........................         (568.8)        (685.7)
          Mortgage loans on real estate issued .......................................       (1,290.8)      (1,581.7)
          Net cash paid for sale of subsidiaries .....................................             --         (206.5)
          Cash received related to acquisition of business ...........................          141.3             --
          Other, net .................................................................           31.6          (32.4)
                                                                                            ------------------------

                Net cash used in investing activities ................................       (1,070.5)      (2,710.0)
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                         Nine Months Ended
                                                                                            September 30,
                                                                                        2000           1999
                                                                                      -----------------------
                                                                                           (in millions)
<S>                                                                                   <C>            <C>
Cash flows from financing activities:
     Issuance of common stock ..................................................       1,715.0             --
     Payments to eligible policyholders under Plan of Reorganization ...........      (1,067.0)            --
     Universal life and investment-type contract deposits ......................       5,250.3        6,510.5
     Universal life and investment-type contract maturities and withdrawals ....      (5,435.8)      (5,298.0)
     Issuance of long-term debt ................................................          20.0            6.0
     Repayment of long-term debt ...............................................         (73.2)         (12.0)
     Net increase (decrease) in commercial paper ...............................          64.6         (134.8)
                                                                                      -----------------------

          Net cash provided by financing activities ............................         473.9        1,071.7
                                                                                      -----------------------

          Net increase (decrease) in cash and cash equivalents .................         219.2         (810.5)

Cash and cash equivalents at beginning of period ...............................       1,817.9        1,876.4
                                                                                      -----------------------

          Cash and cash equivalents at end of period ...........................      $2,037.1       $1,065.9
                                                                                      =======================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of John Hancock
Financial Services, Inc. (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, these
unaudited consolidated financial statements contain all adjustments, consisting
of only normal and recurring adjustments, necessary for a fair presentation of
the financial position and results of operations. Operating results for the
three and nine month periods ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. These unaudited consolidated financial statements should be read in
conjunction with the Company's annual audited financial statements as of
December 31, 1999 included in the Company's Form 10-K for the year ended
December 31, 1999 filed with the Securities and Exchange Commission (hereafter
referred to as the Company's 1999 Form 10-K).

The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.

Reorganization and Initial Public Offering

In connection with John Hancock Mutual Life Insurance Company's (the Mutual
Company) Plan of Reorganization (the Plan), effective February 1, 2000, the
Mutual Company converted from a mutual life insurance company to a stock life
insurance company (i.e., demutualized) and became a wholly-owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Mutual Company were extinguished on
that date and eligible policyholders of the Mutual Company received, in the
aggregate, 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million policy credits as compensation. It has been determined that, due
to complexities involved in determining demutualization compensation, based upon
information provided by the Company, 16,798 shares of common stock were
overstated on the records of the Company's transfer agent as having been issued
as stock compensation in the demutualization and were included in the number of
shares of our common stock previously reported as outstanding. Consequently, the
transfer agent records have been corrected and the total number of shares
represented as outstanding in this Form 10-Q has been adjusted accordingly. This
had no impact on the financial position, results of operations or earnings per
share reported for the three and nine months ended September 30, 2000. In
addition, the Company established a closed block, to fund the guaranteed
benefits and dividends of certain participating insurance policies. In
connection with the Plan, the Mutual Company changed its name to John Hancock
Life Insurance Company.

In addition, on February 1, 2000, the Company completed its initial public
offering (IPO) in which 102.0 million shares of common stock were issued at a
price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of
which $105.7 million was retained by the Company and $1,552.0 million was
contributed to John Hancock Life Insurance Company.

Extraordinary Item

The accompanying unaudited consolidated statements of income reflect
extraordinary expenses of $25.9 million (net of tax of $9.8 million) for the
three months ended September 30, 1999 and $10.2 million and $56.6 million (net
of tax of $0.4 million and $15.2 million, respectively) for the nine months
ended September 30, 2000 and 1999, respectively, relating to costs associated
with the Company's demutualization.


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies - (Continued)

Cumulative Effect of Accounting Change

On January 1, 1999, the Company adopted Statement of Position (SOP) 98-5,
"Reporting the Costs of Start-up Activities," which requires that start-up costs
capitalized prior to January 1, 1999 be written-off and any future start-up
costs be expensed as incurred. The adoption of SOP 98-5 resulted in a charge to
operations of $9.7 million (net of tax of $5.9 million) for the nine months
ended September 30, 1999 that was accounted for as a cumulative effect of
accounting change.

Reclassification

Certain prior period amounts have been reclassified to conform to the current
period presentation.

New Accounting Pronouncements

SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance
Contracts That Do Not Transfer Insurance Risk," provides guidance on how to
account for insurance and reinsurance contracts that do not transfer insurance
risk under a method referred to as deposit accounting. SOP 98-7 was adopted
beginning January 1, 2000 and did not have a material impact on the Company's
unaudited consolidated financial statements.

Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees," provides guidance on how to account for the issuance of stock and
stock options to employees of the Company. Compensation cost for stock options,
if any, is measured as the excess of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. Compensation cost is recognized over the requisite vesting periods based
on market value on the date of grant. On March 31, 2000, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation No. 44, "Accounting
for Certain Transactions involving Stock Compensation", an interpretation of APB
No. 25. The Interpretation clarifies guidance for certain issues that arose in
the application of APB No. 25. The Company was required to adopt the
Interpretation on July 1, 2000. Interpretation No. 44 did not have a material
impact on the Company's unaudited consolidated financial statements.

Recent Accounting Pronouncements

In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement 133." This
Statement amends SFAS No. 133 to defer its effective date for one year, to
fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" - an amendment of FASB Statement No. 133. This Statement makes
certain changes in the hedging provisions of SFAS No. 133, and is effective
concurrent with SFAS No. 133. As amended, SFAS No. 133 requires all derivatives
to be recognized on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through earnings. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of the
derivatives will either be offset against the change in the fair value of the
hedged assets, liabilities or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be recognized
immediately in earnings.


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies - (Continued)

The Company plans to adopt SFAS No. 133 and SFAS No. 138 effective January 1,
2001 and has evaluated the effect that the implementation will have on its
results of operations and financial position, given the Company's derivatives
holdings and market conditions as of September 30, 2000. The results of that
evaluation indicate that the implementation of SFAS No. 133 will not have a
material impact on the results of operations and financial position of the
Company. Changes in market conditions, the Company's hedging activities, or
accounting guidance between September 30, 2000 and the implementation date of
January 1, 2001 could result in a materially different impact as of the
implementation date.

In September 2000, the FASB issued SFAS No 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
replaces SFAS No. 125. The Statement provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities. Those standards are based on consistent application of a financial
components approach that focuses on control. Under that approach, after a
transfer of financial assets, the Company recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities when
extinguished. The Standard provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. The Statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001. The
Statement is effective for recognition and reclassification of collateral and
for disclosures relating to securitization transactions and collateral beginning
January 1, 2001.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 clarifies the SEC staff's views on applying generally
accepted accounting principles to revenue recognition in financial statements.
In March 2000, the SEC issued an amendment, SAB 101A, which deferred the
effective date of SAB 101. In June 2000, the SEC issued a second amendment, SAB
101B, which deferred the effective date of SAB 101 to no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. The Company
plans to adopt SAB 101 in the fourth quarter of this year, and is currently
evaluating the effect that the implementation will have on its results of
operations and financial position. The impact is not known at this time.

Recent Acquisitions

On October 1, 1999, The Maritime Life Assurance Company (Maritime), an indirect
majority-owned Canadian subsidiary of the Company, completed its purchase of
Aetna Canada Holdings Limited (Aetna Canada). On March 1, 2000, the Company
acquired the individual long-term care insurance business of Fortis, Inc.
(Fortis). The pro forma results for the periods ending September 30, 2000 and
September 30, 1999, assuming the acquisitions of Aetna Canada and Fortis had
taken place as of the beginning of 2000 and 1999, respectively, would not be
materially different from the reported results.


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -- Segment Information

The Company operates in the following five business segments: two segments
primarily serve retail customers, two segments serve institutional customers and
the fifth segment is the Corporate and Other Segment, which includes
international operations. The retail segments are the Protection Segment and the
Asset Gathering Segment. The institutional segments are the Guaranteed and
Structured Financial Products Segment (G&SFP) and the Investment Management
Segment. For additional information about the Company's business segments,
please refer to the Company's 1999 Form 10-K.

The following table summarizes selected financial information by segment for the
three and nine month periods ended, or as of September 30 and reconciles segment
revenues and segment after-tax operating income to amounts reported in the
unaudited consolidated statements of income (in millions). Included in the
Protection Segment for 2000 are the closed block assets and liabilities, as well
as the contribution from the closed block, which is reflected in "Revenues" in
the table below (see Note 5).

<TABLE>
<CAPTION>
                                                                Retail                      Institutional
                                                   Retail        Asset      Institutional     Investment    Corporate
                                                 Protection    Gathering        G&SFP         Management    and Other   Consolidated
                                                 ----------    ---------        -----         ----------    ---------   ------------
<S>                                               <C>          <C>            <C>             <C>           <C>           <C>
As of or for the three months ended
September 30, 2000
Revenues:
   Segment operating revenues ................    $   437.2    $   297.2      $   492.1       $    45.4     $   424.4     $ 1,696.3
   Realized investment gains (losses), net ...         (3.0)         4.2          (17.9)            1.1          14.4          (1.2)
                                                  ---------------------------------------------------------------------------------
   Revenues ..................................    $   434.2    $   301.4      $   474.2       $    46.5     $   438.8     $ 1,695.1
                                                  =================================================================================
   Net investment income .....................    $   142.2    $   111.5      $   438.6       $     7.0     $    96.6     $   795.9
Net Income:
   Segment after-tax operating income ........    $    63.8    $    38.4      $    48.2       $     7.8     $    23.9     $   182.1
   Realized investment gains (losses), net ...         (2.0)         2.6          (11.3)            0.7           7.3          (2.7)
   Restructuring charges .....................         (1.8)        (0.4)          (0.1)             --          (0.1)         (2.4)
   Surplus tax ...............................          5.5          0.4            4.0              --          (2.6)          7.3
   Extraordinary item ........................           --           --             --              --            --            --
   Other demutualization related costs .......           --           --             --              --            --            --
                                                  ---------------------------------------------------------------------------------
   Net income ................................    $    65.5    $    41.0      $    40.8       $     8.5     $    28.5     $   184.3
                                                  =================================================================================
Supplemental Information:
   Inter-segment revenues ....................    $      --    $      --      $      --       $     9.7     $    (9.7)    $      --
   Equity in net income of investees
      accounted for by the equity method .....         (2.8)        (1.5)          (0.4)           (2.5)         13.1           5.9
   Amortization of deferred policy
      acquisition costs, excluding amounts
      related to realized investment gains ...         19.4         17.5            0.8              --          10.8          48.5
   Segment assets ............................    $26,879.3    $14,439.1      $30,801.0       $ 2,149.6     $12,436.0     $86,705.0
</TABLE>


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Retail                    Institutional
                                                 Retail       Asset      Institutional   Investment     Corporate
                                               Protection   Gathering        G&SFP       Management     and Other     Consolidated
                                               ----------   ---------        -----       ----------     ---------     ------------
<S>                                            <C>          <C>            <C>           <C>             <C>             <C>
As of or for the three months ended
September 30, 1999
Revenues:
   Segment operating revenues ..............   $   732.2    $   267.8      $   487.0     $    52.4       $   242.3       $ 1,781.7
   Realized investment losses, net .........        (6.7)        (2.4)         (38.3)         (0.8)             --           (48.2)
                                               -----------------------------------------------------------------------------------
   Revenues ................................   $   725.5    $   265.4      $   448.7     $    51.6       $   242.3       $ 1,733.5
                                               ===================================================================================
   Net investment income ...................   $   286.5    $    95.9      $   434.9     $     9.7       $    37.1       $   864.1
Net Income:
   Segment after-tax operating income ......   $    48.1    $    35.8      $    45.2     $    10.4       $     9.7       $   149.2
   Realized investment losses, net .........        (8.5)        (1.8)         (25.1)         (0.6)           (6.6)          (42.6)
   Class action lawsuit ....................          --           --             --            --           (52.0)          (52.0)
   Restructuring charges ...................        (3.0)        (0.7)            --            --              --            (3.7)
   Surplus tax .............................        (4.1)        (0.1)          (0.6)           --            (1.1)           (5.9)
   Extraordinary item ......................       (17.0)        (3.6)          (4.2)           --            (1.1)          (25.9)
                                               -----------------------------------------------------------------------------------
   Net income ..............................   $    15.5    $    29.6      $    15.3     $     9.8       $   (51.1)      $    19.1
                                               ===================================================================================
Supplemental Information:
   Inter-segment revenues ..................   $      --    $      --      $      --     $    18.4       $   (18.4)      $      --
   Equity in net income of investees
      accounted for by the equity method ...         5.3          5.7            5.7           0.2            (4.9)           12.0
   Amortization of deferred policy
      acquisition costs, excluding
      amounts related to realized
      investment gains .....................        24.8         18.0            1.4            --            13.3            57.5
   Segment assets ..........................   $26,262.0    $13,267.1      $31,641.4     $ 3,263.4       $ 5,772.2       $80,206.1
</TABLE>


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                                Retail                   Institutional
                                                   Retail        Asset    Institutional    Investment     Corporate
                                                 Protection    Gathering      G&SFP        Management     and Other     Consolidated
                                                 ----------    ---------      -----        ----------     ---------     ------------
<S>                                              <C>          <C>          <C>            <C>            <C>             <C>
As of or for the nine months ended
September 30, 2000
Revenues:
   Segment operating revenues ................   $ 1,370.0    $   894.1    $ 1,699.2      $   173.3      $ 1,344.7       $ 5,481.3
   Realized investment gains (losses), net ...        11.5         10.1        (38.9)           1.7           93.6            78.0
                                                 ---------------------------------------------------------------------------------
   Revenues ..................................   $ 1,381.5    $   904.2    $ 1,660.3      $   175.0      $ 1,438.3       $ 5,559.3
                                                 =================================================================================
   Net investment income .....................   $   463.3    $   327.4    $ 1,288.0      $    17.3      $   360.5       $ 2,456.5
Net Income:
   Segment after-tax operating income ........   $   193.4    $   104.0    $   160.3      $    40.2      $    73.3       $   571.2
   Realized investment gains (losses), net ...         7.0          6.3        (24.4)           1.0           57.4            47.3
   Restructuring charges .....................        (5.4)        (1.4)        (2.3)            --           (1.0)          (10.1)
   Surplus tax ...............................         8.4          0.5          5.5             --            0.1            14.5
   Extraordinary item ........................        (0.2)        (0.1)        (0.2)            --           (9.7)          (10.2)
   Other demutualization related costs .......        (6.7)        (1.4)        (1.7)            --           (0.4)          (10.2)
   Group pension dividend transfer ...........          --           --          5.7             --             --             5.7
                                                 ---------------------------------------------------------------------------------
   Net income ................................   $   196.5    $   107.9    $   142.9      $    41.2      $   119.7       $   608.2
                                                 =================================================================================
Supplemental Information:
   Inter-segment revenues ....................   $      --    $      --    $      --      $    31.2      $   (31.2)      $      --
   Equity in net income of investees
      accounted for by the equity method .....         2.9          1.7          5.9            5.5           71.6            87.6
   Amortization of deferred policy
      acquisition costs, excluding
      amounts related to realized
      investment gains .......................        45.6         53.6          2.2             --           41.1           142.5
   Segment assets ............................   $26,879.3    $14,439.1    $30,801.0      $ 2,149.6      $12,436.0       $86,705.0
As of or for the nine months ended
September 30, 1999
Revenues:
   Segment operating revenues ................   $ 2,134.0    $   788.5    $ 1,750.2      $   141.7      $   808.3       $ 5,622.7
   Realized investment gains (losses), net ...       109.2          5.6         88.1            0.2           (7.7)          195.4
                                                 ---------------------------------------------------------------------------------
   Revenues ..................................   $ 2,243.2    $   794.1    $ 1,838.3      $   141.9      $   800.6       $ 5,818.1
                                                 =================================================================================
   Net investment income .....................   $   802.7    $   283.4    $ 1,272.0      $    33.3      $   189.6       $ 2,581.0
Net Income:
   Segment after-tax operating income ........   $   137.3    $    97.5    $   165.8      $    27.6      $    45.1       $   473.3
   Realized investment gains (losses), net ...        69.0          3.5         55.7            0.1          (10.3)          118.0
   Class action lawsuit ......................          --           --           --             --          (91.1)          (91.1)
   Restructuring charges .....................        (3.0)        (4.5)          --             --             --            (7.5)
   Surplus tax ...............................        (7.7)        (0.7)        (3.8)            --           (5.1)          (17.3)
   Extraordinary item ........................       (36.7)        (7.6)       (10.0)            --           (2.3)          (56.6)
   Cumulative effect of accounting
      change .................................          --         (9.6)          --           (0.1)            --            (9.7)
                                                 ---------------------------------------------------------------------------------
   Net income ................................   $   158.9    $    78.6    $   207.7      $    27.6      $   (63.7)      $   409.1
                                                 =================================================================================
Supplemental Information:
   Inter-segment revenues ....................   $      --    $      --    $      --      $    40.5      $   (40.5)      $      --
   Equity in net income of investees
      accounted for by the equity method .....        25.4          5.7          7.8            1.8            0.8            41.5
   Amortization of deferred policy
      acquisition costs, excluding
      amounts related to realized
      investment gains .......................        81.2         41.2          2.1             --           20.5           145.0
   Segment assets ............................   $26,262.0    $13,267.1    $31,641.4      $ 3,263.4      $ 5,772.2       $80,206.1
</TABLE>


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 -- Severance

In 1999, the Company initiated a restructuring plan to reduce costs and increase
future operating efficiency by consolidating portions of its operations. The
plan consists primarily of reducing staff in the home office and terminating
certain operations outside the home office.

In connection with the restructuring plan, approximately 330 employees have been
or will be terminated. These employees are or have been associated with
operations in our Boston office and outside the home office. As of September 30,
2000, the liability for employee termination costs included in other liabilities
was $22.9 million. Employee termination costs, included in other operating costs
and expenses, were $3.6 million and $16.6 million for the three and nine month
periods ended September 30, 2000 and $6.0 million and $14.1 million for the
comparable periods of the prior year. Of the total number of employees affected,
325 were terminated through September 30, 2000, and had received benefit
payments of approximately $21.5 million through September 30, 2000.

Note 4 -- Contingencies

In the normal course of its business operations, the Company is involved in
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of September 30, 2000. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.

During 1997, the Company entered into a court-approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The reserve held in connection with the
settlement to provide for relief to class members and for legal and
administrative costs associated with the settlement amounted to $284.4 million
and $496.6 million at September 30, 2000 and December 31, 1999, respectively.
There were no additional reserves recorded related to the settlement for the
three and nine month periods ended September 30, 2000. Reserves recorded in 1999
related to the settlement were $80.0 and $140.2 million for the three and
nine-month periods ended September 30, 1999, respectively. The estimated reserve
is based on a number of factors, including the estimated number of claims, the
expected type of relief to be sought by class members (general relief or
alternative dispute resolution), the estimated cost per claim and the estimated
costs to administer the claims. During 1996, management determined that it was
probable that a settlement would occur and that a minimum loss amount could be
reasonably estimated. Accordingly, the Company recorded its best estimate based
on the information available at the time. The terms of the settlement agreement
were negotiated throughout 1997 and approved by the court on December 31, 1997.
In accordance with the terms of the settlement agreement, the Company contacted
class members during 1998 to determine the actual type of relief to be sought by
class members. The majority of the responses from class members were received by
the fourth quarter of 1998. The type of relief sought by class members differed
from the Company's previous estimates, primarily due to additional outreach
activities by regulatory authorities during 1998 encouraging class members to
consider alternative dispute resolution relief. In 1999, the Company updated its
estimate of the cost of claims subject to alternative dispute resolution relief
and revised its reserve estimate accordingly. Given the uncertainties associated
with estimating the reserve, it is reasonably possible that the final cost of
the settlement could differ materially from the amounts presently provided for
by the Company. The Company will continue to update its estimate of the final
cost of the settlement as the claims are processed and more specific information
is developed, particularly as the actual cost of the claims subject to
alternative dispute resolution becomes available. However, based on information
available at the time, and the uncertainties associated with the final claim
processing and alternative dispute resolution, the range of any additional cost
related to the settlement cannot be reasonably estimated.


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 -- Contingencies - (Continued)

On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned
subsidiary of WellPoint Health Networks, Inc. The business sold included the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of
which were indirect wholly-owned subsidiaries of the Company. The Company
retained its group long-term care operations. The insurance business sold was
transferred to UNICARE through a 100% coinsurance agreement. The Company secured
a $397.0 million letter of credit facility with a group of banks. The banks
agreed to issue a letter of credit to the Company pursuant to which the Company
could initially draw up to $397.0 million for any claims not satisfied by
UNICARE under the coinsurance agreement after the Company incurred the first
$113.0 million of losses from such claims. The amount available pursuant to the
letter of credit agreement and any letter of credit issued thereunder is
automatically reduced on a scheduled basis consistent with the anticipated
run-off of liabilities related to the business reinsured under the coinsurance
agreement. The letter of credit facility was reduced to $272.0 million effective
March 1, 2000 and is expected to be reduced again to $127.0 million on March 1,
2001. The letter of credit agreement and any letter of credit issued thereunder
are scheduled to expire on March 1, 2002. The Company remains liable to its
policyholders to the extent that UNICARE does not meet its contractual
obligations under the coinsurance agreement.

Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter of 1999
the Company recognized a charge for uncollectible reinsurance of $133.7 million,
after tax, as its best estimate of its remaining loss exposure. The Company
believes that any exposure to loss from this issue, in addition to amounts
already provided for as of September 30, 2000, would not be material.

Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company,
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurers.


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 -- Closed Block

Under the Plan, the Company created a closed block for the benefit of policies
included therein. For a detailed description of the closed block, see Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 14 -- Subsequent Events in notes to consolidated financial
statements in the Company's 1999 Form 10-K.

The following table sets forth certain summarized financial information relating
to the closed block as of the dates indicated:

<TABLE>
<CAPTION>
                                                                               September 30,   February 1,
                                                                                   2000           2000
                                                                               -------------- --------------
                                                                                       (in millions)
<S>                                                                              <C>            <C>
Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
      (fair value: September 30--$2,283.9; February 1--$2,259.6) ..........      $ 2,262.5      $ 2,270.7
   Available-for-sale--at fair value
      (cost: September 30--$2,354.8; February 1--$2,275.1) ................        2,290.5        2,199.2
Equity securities:
   Available-for-sale--at fair value
      (cost: September 30--$6.6; February 1--$6.4) ........................            5.1            3.4
Mortgage loans on real estate .............................................        1,931.1        1,875.9
Policy loans ..............................................................        1,534.3        1,561.2
Short-term investments ....................................................           44.2             --
Other invested assets .....................................................            6.0            5.3
                                                                                 ------------------------
   Total Investments ......................................................        8,073.7        7,915.7

Cash and cash equivalents .................................................          329.0          158.6
Accrued investment income .................................................          149.7             --
Premiums and accounts receivable ..........................................           13.8            4.0
Deferred policy acquisition costs .........................................        1,021.8        1,062.5
Other assets ..............................................................           80.4          202.2
                                                                                 ------------------------
   Total Closed Block Assets ..............................................      $ 9,668.4      $ 9,343.0
                                                                                 ========================

Liabilities
Future policy benefits ....................................................      $ 9,830.4      $ 9,732.8
Policyholders' funds ......................................................        1,903.9        1,885.4
Other liabilities .........................................................          236.2          500.1
                                                                                 ------------------------
   Total Closed Block Liabilities .........................................      $11,970.5      $12,118.3
                                                                                 ========================
</TABLE>


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 -- Closed Block - (Continued)

The following table sets forth certain summarized financial information relating
to the closed block for the period indicated:

<TABLE>
<CAPTION>
                                                                                  For the Period
                                                       Three Months Ended       February 1, through
                                                         September 30,             September 30,
                                                              2000                      2000
                                                       --------------------------------------------
                                                                        (in millions)
<S>                                                        <C>                      <C>
Revenues
    Premiums ........................................      $  217.2                 $  619.0
    Net investment income ...........................         155.8                    423.1
    Realized investment gains, net ..................           1.4                      1.3
    Other revenue ...................................          (0.2)                    (0.4)
                                                       --------------------------------------------
       Total revenues ...............................         374.2                  1,043.0

Benefits and Expenses
    Benefits to policyholders .......................         203.1                    613.4
    Other operating costs and expenses ..............          (3.4)                    (9.1)
    Amortization of deferred policy acquisition costs          27.1                     55.5
    Dividends to policyholders ......................         108.0                    292.5
                                                       --------------------------------------------
       Total benefits and expenses ..................         334.8                    952.3
                                                       --------------------------------------------

       Contribution from the closed block ...........      $   39.4                 $   90.7
                                                       ============================================
</TABLE>

Note 6 -- Earnings Per Share

The following is a computation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period excluding dilutive effects of options, warrants or convertible
securities. Diluted earnings per share reflects the potential dilution that
could occur if dilutive securities, such as options and non- vested stock
grants, were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company.

For purposes of the Company's unaudited earning per share and proforma earnings
per share calculations, the weighted-average number of common shares outstanding
during the respective periods for basic earnings per share was the 314.8 million
shares issued in the Company's demutualization and IPO. The 314.8 million shares
represent 212.8 million shares provided to eligible policyholders in connection
with the demutualization and 102.0 million shares sold in the IPO. Dilutive
securities to the Company's earning per share calculation represent the
weighted-average shares outstanding after application of the treasury stock
method to the 4.6 million options granted as part of the Company's Long-Term
Stock Incentive Plan and the 0.3 million non-vested shares granted to key
employees during the period February 1 through September 30, 2000.


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 -- Earnings Per Share - (Continued)

<TABLE>
<CAPTION>
                                                                                 For the Period
                                                      Three Months Ended        February 1 through
                                                      September 30, 2000        September 30, 2000
                                                    ------------------------------------------------
                                                            (in millions, except per share data)
<S>                                                          <C>                     <C>
Net income ....................................              $ 184.3                 $ 564.2
                                                    ================================================

Weighted-average shares outstanding (a) .......                314.8                   314.8
   Dilutive securities
   Stock options ..............................                  2.0                     1.6
   Non-vested stock ...........................                  0.2                     0.2
                                                    ------------------------------------------------
Weighted-average shares outstanding
   assuming dilution (b) ......................                317.0                   316.6
                                                    ================================================

Net income per share
   Basic ......................................              $   .59                 $  1.79
                                                    ================================================
   Diluted ....................................              $   .58                 $  1.78
                                                    ================================================
</TABLE>

(a)   Used to compute basic earnings per share
(b)   Used to compute diluted earnings per share

Note 7 -- Stock Compensation Plans

On January 5, 2000, the Mutual Company, as sole shareholder of John Hancock
Financial Services, Inc., approved and adopted the 1999 Long-Term Stock
Incentive Plan (the Incentive Plan), which originally had been approved by the
Board of Directors of the Company on August 31, 1999. Under the Incentive Plan,
which became effective on February 1, 2000, the effective date of the Plan of
Reorganization of the Mutual Company, options granted may be either
non-qualified options or incentive stock options qualifying under Section 422 of
the Internal Revenue Code. The Incentive Plan objectives include attracting and
retaining the best personnel, providing for additional performance incentives,
and promoting the success of the Company by providing employees the opportunity
to acquire the Company's common stock.

The maximum number of shares of common stock available under the Incentive Plan
is 5% of the total number of shares of common stock that were outstanding
following the IPO. In addition, no more than 4% of these shares outstanding
shall be available for awards of incentive stock options under the Incentive
Plan, and no more than 1% of these shares outstanding shall be available for
stock awards, which includes non-vested stock. The aggregate number of shares
that may be covered by awards for any one participant over the period that the
Incentive Plan is in effect shall not exceed 1% of these shares outstanding.
Subject to these overall limits, there is no annual limit on the number of stock
options or stock awards that may be granted in any one year.

The Incentive Plan has options exercisable at March 13, 2001 and 2002, June 12,
2001 and 2002 and August 14, 2001 and 2002. The Company has granted 4.6 million
options as of September 30, 2000. Options outstanding under the Incentive Plan
were granted at a price equal to the market value of the stock on the date of
grant, vest over a two-year period, and expire five years after the grant date.


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 7 -- Stock Compensation Plans - (Continued)

The status of stock options under the Long-Term Stock Incentive Plan is
summarized below as of September 30:

<TABLE>
<CAPTION>
                                     Number of shares         Weighted-average
                                      (in thousands)            exercise price
                                    -------------------------------------------
<S>                                      <C>                        <C>
Outstanding at February 1, 2000               --                         --
  Granted                                4,618.4                    $ 14.06
  Exercised                                   --                         --
  Canceled                                 257.1                      13.94
                                    -------------------------------------------

Outstanding at September 30, 2000        4,361.3                      14.07

Options exercisable at:
   March 13, 2001                        2,152.7                      13.94
   June 12, 2001                             6.3                      23.37
   August 14, 2001                          21.7                      23.75
   March 13, 2002                        2,152.6                      13.94
   June 12, 2002                             6.3                      23.37
   August 14, 2002                          21.7                      23.75
</TABLE>

On March 13, 2000, the Company granted 291,028 shares of non-vested stock to key
personnel at a weighted- average grant price per share of $14.34. During the
third quarter of 2000, 41,794 shares of non-vested stock were forfeited. These
grants of non-vested stock are forfeitable and vest at three or five years of
service with the Company.

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by APB Opinion No. 25, under which no compensation cost for
stock options is recognized for stock option awards granted at or above fair
market value. Had compensation expense for the Company's stock-based
compensation plan been determined based upon fair values at the grant dates for
awards under the plan in accordance with SFAS No. 123, the Company's net
earnings and earnings per share would have been reduced to the pro forma amounts
indicated below. Additional stock option awards are anticipated in future years.

The Black-Scholes option valuation model was developed for use in estimating
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

The estimated weighted-average grant date fair value per share of stock options
granted during 2000 using the Black-Scholes option valuation model was $3.66.
The fair value of options granted in 2000 is estimated on the date of grant
using the following assumptions: dividend yield of 1.8%, expected volatility of
24%, risk-free interest rate range of 4.8% to 5.6% depending on grant date, and
an expected life ranging from 2 to 5 years.


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 7 -- Stock Compensation Plans - (Continued)

For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
                                                   Three Months         For the Period
                                                Ended September 30,   February 1 through
                                                       2000           September 30, 2000
                                                ----------------------------------------
                                                  (in millions, except per share data)
<S>                                                 <C>                  <C>
Net income:
   As reported                                      $   184.3            $   564.2
   Pro forma                                            183.1                561.4
Earnings per share
 Basic:
   As reported                                            .59                 1.79
   Pro forma                                              .58                 1.78
 Diluted:
   As reported                                            .58                 1.78
   Pro forma                                              .58                 1.77
</TABLE>

At September 30, 2000, the Company had 4.4 million stock options outstanding
with a weighted-average remaining contractual life of 4.4 years and a
weighted-average exercise price of $14.07. As of September 30, 2000, no options
are exercisable, because none are vested at that date.

The Company granted 291,028 shares of non-vested stock during the period
February 1, 2000 to September 30, 2000 with a total grant-date exercise price of
$4.2 million. During the third quarter of 2000, 41,794 shares of non-vested
stock were forfeited with a total grant-date exercise price of $0.6 million.

Stock Ownership Loan Program

In January 2000, the Company adopted a loan program whereby the Company may
extend credit to key executives to purchase stock in order for them to meet
mandatory stock ownership requirements. These full recourse loans bear interest
at variable rates and principal and interest are payable no later than the death
of the executive, termination of employment or five years. As of September 30,
2000, these loans receivable were $3.2 million and are recorded in other assets.

Note 8 -- Subsequent Events

Stock Repurchase Program

On October 26, 2000, the Company announced that its Board of Directors has
authorized a stock repurchase program, with no termination date, under which the
Company will purchase up to $500.0 million of its outstanding common stock.
Under the stock repurchase program, purchases will be made from time to time,
depending on market conditions, business opportunities and other factors, in the
open market or through privately negotiated transactions, and which may be, if
deemed appropriate, through a systematic program.


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS
of OPERATIONS

      Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of John Hancock Financial
Services, Inc. (John Hancock or the Company) as of September 30, 2000, compared
with December 31, 1999, and its consolidated results of operations for the three
month and nine month periods ended September 30, 2000 and September 30, 1999,
and, where appropriate, factors that may affect future financial performance.
The discussion of the Company's consolidated financial results of operations
includes the results of the closed block for the period February 1, 2000 (the
date the closed block became effective) through September 30, 2000 combined on a
line by line basis with the results of operations outside the closed block for
such period, as further discussed below. This discussion should be read in
conjunction with the Company's MD&A and annual audited financial statements as
of and for the year ended December 31, 1999 included in the Company's Form 10-K
for the year ended December 31, 1999 filed with the Securities and Exchange
Commission (hereafter referred to as the Company's 1999 Form 10-K) and unaudited
consolidated financial statements and related notes included elsewhere in this
Form 10-Q.

      Statements, analyses, and other information contained in this report
relating to trends in the Company's operations and financial results, the
markets for the Company's products, the future development of the Company's
business, and the contingencies and uncertainties to which the Company may be
subject, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "intend," "will," "should," "may," and other
similar expressions, are "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. Such statements are made based upon
management's current expectations and beliefs concerning future events and their
effects on the Company and may not be those anticipated by management. The
Company's actual results may differ materially from the results anticipated in
these forward-looking statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Important Factors that May Affect
Future Results" included herein for a discussion of factors that could cause or
contribute to such material differences.

The Reorganization and Initial Public Offering

      The Board of Directors of John Hancock Mutual Life Insurance Company (the
Mutual Company) unanimously adopted the Plan of Reorganization (the Plan) on
August 31, 1999. Under the terms of the Plan, effective February 1, 2000, the
Mutual Company converted from a mutual life insurance company to a stock life
insurance company (i.e., demutualized) and became a wholly-owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Mutual Company were extinguished on
that date and eligible policyholders of the Mutual Company received, in
aggregate, 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million of policy credits as compensation. It has been determined that,
due to complexities involved in determining demutualization compensation, based
upon information provided by the Company, 16,798 shares of common stock were
overstated on the records of the Company's transfer agent as having been issued
as stock compensation in the demutualization and were included in the number of
shares of our common stock previously reported as outstanding. Consequently, the
transfer agent records have been corrected and the total number of shares
represented as outstanding in this Form 10-Q has been adjusted accordingly. This
had no impact on the financial position, results of operations or earnings per
share reported for the three and nine months ended September 30, 2000. In
connection with the reorganization, the Mutual Company changed its name to John
Hancock Life Insurance Company (the Life Company).

      In addition, on February 1, 2000, the Company completed its initial public
offering (IPO) in which 102.0 million shares of common stock were issued at a
price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of
which $105.7 million was retained by the Company and $1,552.0 million was
contributed to the Life Company.

      Under the Plan, as of February 1, 2000, the Life Company created a closed
block for the benefit of policies included therein. The purpose of the closed
block is to protect the policy dividend expectations of the policies included in
the closed block after demutualization. Unless the Commissioner of Insurance of


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the Commonwealth of Massachusetts and, in certain circumstances the New York
Superintendent of Insurance, consent to an earlier termination, the closed block
will continue in effect until the date none of such policies is in-force. As of
February 1, 2000, the Company segregated closed block assets of $9,343.0
million, an amount that is expected to produce cash flows which, together with
anticipated revenues from policies included in the closed block, is expected to
be sufficient to provide for payment of policy benefits, taxes and direct asset
acquisition and disposal costs, and for continuation of policy dividend scales
payable in 1999, so long as the experience underlying such dividend scales
continues. The assets allocated to the closed block and any cash flows provided
by these assets will solely benefit the holders of policies included in the
closed block. As of February 1, 2000, when the closed block was established,
total closed block liabilities were $12,118.3 million.

      If the assets allocated to the closed block, the cash flows therefrom and
the revenues from the closed block business prove to be insufficient to pay the
benefits guaranteed under the policies included in the closed block, the Life
Company will be required to make payments from its general funds in an amount
equal to the shortfall. We funded the closed block to provide for payment of
guaranteed benefits on such policies and for continuation of dividends paid
under 1999 policy dividend scales, assuming the experience underlying such
dividend scales continues. Therefore, we do not believe it will be necessary to
use general funds to pay guaranteed benefits on closed block business unless the
closed block business experiences substantial adverse deviations in investment,
mortality, persistency or other experience factors.

      For additional information on the closed block see Note 5 to the unaudited
consolidated financial statements and the Company's 1999 Form 10-K.

      The costs relating to the demutualization, excluding costs relating to the
offering, were approximately $132.5 million, net of income taxes, of which $25.9
million was recognized in the three months ending September 30, 1999, while
$20.4 million and $56.6 million was recognized in the nine month periods ended
September 30, 2000 and 1999, respectively. Demutualization expenses include
printing and mailing costs and our aggregate cost of engaging independent
accounting, actuarial, financial, investment banking, legal and other
consultants to advise us. In addition, our costs include the costs of the staff
and advisors of the Massachusetts Division of Insurance and the New York
Insurance Department as to the demutualization process and related matters.

Transactions Affecting Comparability of Results of Operations--Disposed
Businesses

      The comparison of the results of operations for the nine-month periods
ended September 30, 2000 and 1999 is impacted by the disposal of a business at
the end of the first quarter of 1999. On March 31, 1999, we completed the sale
of Unigard Security Insurance Company ("USIC") and John Hancock Insurance Co. of
Bermuda Ltd. ("John Hancock Bermuda"). The sale of USIC was completed by
entering into a 100% quota share reinsurance agreement with a third party
reinsurer and then through a stock sale. We also sold 100% of the stock of John
Hancock Bermuda, which offered reinsurance products and services. Assets and
liabilities transferred in connection with both sales amounted to $381.0 million
and $161.8 million, respectively. The sale of USIC resulted in an after-tax loss
of $16.8 million. John Hancock Bermuda was sold for its net book value, which
resulted in the recognition of no gain or loss.

      In order to enhance comparability, the following discussion of our results
of operations is supplemented, where appropriate, by financial information of
the disposed businesses in each period presented.


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations

      The table below presents the consolidated results of operations for the
three-month and nine-month periods ended September 30, 2000 and 1999,
respectively. For comparability with prior periods, the table below includes the
results of operations of the closed block for the period February 1, 2000
through September 30, 2000 combined on a line by line basis with the results of
operations outside the closed block.

<TABLE>
<CAPTION>
                                                  Three months ended            Nine months ended
                                                     September 30,                September 30,
                                                ----------------------       -----------------------
                                                  2000          1999           2000           1999
                                                --------      --------       --------       --------
                                                                   (in millions)
<S>                                             <C>           <C>            <C>            <C>
Revenues (1)                                    $2,029.9      $1,733.5       $6,511.6       $5,818.1

Benefits and expenses (1)                        1,763.9       1,660.3        5,598.6        5,103.5
                                                --------      --------       --------       --------

Income before income taxes, extraordinary
  item and cumulative effect of accounting
  change                                           266.0          73.2          913.0          714.6

Income taxes                                        81.7          28.2          294.6          239.2
                                                --------      --------       --------       --------

Income before extraordinary item and
  cumulative effect of accounting change           184.3          45.0          618.4          475.4
                                                --------      --------       --------       --------
Extraordinary item - demutualization
          expenses, net of tax                        --         (25.9)         (10.2)         (56.6)
Cumulative effect of accounting change                --            --             --           (9.7)
                                                --------      --------       --------       --------

               Net income                       $  184.3      $   19.1       $  608.2       $  409.1
                                                ========      ========       ========       ========
</TABLE>

(1)   Revenues and benefits and expenses for the three months and nine months
      ended September 30, 2000 excludes $334.8 million and $952.3 million in
      closed block expenses, respectively. These expenses are included in
      revenues in the contribution from the closed block on the unaudited
      consolidated statement of income for the three months and nine months
      ended September 30, 2000.

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Consolidated income before income taxes, extraordinary item and cumulative
effect of accounting change of $266.0 million for the three months ended
September 30, 2000 increased by $192.8 million, or 263.4%, from $73.2 million
reported in the comparable prior year period. The increase is primarily
attributable to an increase of $117.8 million in the Corporate and Other
Segment, a $40.6 million increase in the Protection Segment, a $26.8 million
increase in the Guaranteed and Structured Financial Products Segment and a $9.5
million increase in the Asset Gathering Segment. These increases were offset by
a decrease of $1.9 million in the Investment Management Segment. The Corporate
and Other Segment increased $117.8 million primarily due to an $80.0 million
increase in the class action reserve in 1999 related to revised estimates of the
settlement and a $59.4 million increase in net investment income, of which $23.6
million was attributable to Corporate Operations, resulting from growth in the
corporate account asset base. The Protection Segment increased $40.6 million
primarily due to an increase of $11.5 million in net investment income
attributable to increases in average net invested assets and higher interest
rates. In addition, there was a decrease of $29.0 million in benefits to
policyholders resulting from improved mortality and the absence of reserves
associated with unreported death claims identified as part


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

of the policyholder demutualization mailing in the prior year. The increase of
$26.8 million in the Guaranteed and Structured Financial Products Segment was
primarily due to a $39.4 million increase in realized gains resulting from the
Company's exit from the short term funding business in December of 1999,
partially offset by lower product fees. The increase of $9.5 million in the
Asset Gathering Segment was primarily due to a $15.6 million increase in net
investment income resulting from increases in invested assets and spreads,
partially offset by increases in benefits. The Investment Management Segment's
decrease of $1.9 million was primarily due to gains from securitization of
mortgage loans in 1999.

      Revenues of $2,029.9 million for the three months ended September 30, 2000
increased $296.4 million, or 17.1%, compared to the three months ended September
30, 1999, primarily due to a $196.4 million increase in the Corporate and Other
Segment. This increase in the Corporate and Other Segment was primarily due to
an increase of $144.3 million, or 75.7% in international operations attributable
to the acquisition of Aetna Canada Holdings Limited (Aetna Canada). Corporate
operations also added $52.6 million, or 153.3%, mainly due to an increase of
$15.2 million in realized gains and a $23.6 million increase in net investment
income resulting from growth in the corporate account asset base. Protection
Segment revenues increased $43.6 million, or 6.0%, primarily due to an increase
of $28.5 million in premiums resulting from the acquisition of the long-term
care business of Fortis and an $11.5 million increase in net investment income
resulting from an increase in average net invested assets and higher interest
rates. Asset Gathering Segment revenues increased $35.9 million, or 13.5%,
primarily due to higher premiums and net investment income on increased assets
in the fixed annuity business. Revenues in the Guaranteed and Structured
Financial Products Segment increased $25.5 million, or 5.7%, primarily due to an
increase of $39.4 million in realized investment gains resulting from the exit
of the short term funding business in December of 1999, partially offset by
decreased premiums in the spread-based business and decreased product fees.
Investment Management Segment revenues decreased $5.0 million, or 9.8%,
primarily due to a $2.7 million decrease in net investment income caused by an
allocation of equity interest in collateralized bond obligations to the other
business segments in addition to lower asset based fees as a result of a
decrease in average assets under management.

      Benefits and expenses of $1,763.9 million for the three months ended
September 30, 2000 increased $103.6 million, or 6.2%, compared to the three
months ended September 30, 1999, primarily due to an increase in the Corporate
and Other Segment of $78.6 million. This increase in the Corporate & Other
Segment is primarily driven by a $137.1 million increase in international
operations which was attributable to the acquisition of Aetna Canada Holdings
Limited (Aetna Canada). The increase in international operations was partially
offset by a decrease in corporate operations due to the 1999 increase of the
class action reserve related to revised estimates of the settlement. The Asset
Gathering Segment increased $26.4 million, or 12.4%, primarily due to an
increase in benefits to policyholders resulting from an increase in benefits
paid on immediate annuities. This increase in benefits paid on immediate
annuities is driven by the success the company has had in developing this
business. The Protection Segment's benefits and expenses increased $3.1 million,
or 0.5%, primarily due to an increase in commissions driven by an increase in
sales within the individual long-term care business and an increase in dividends
due to a normal scale increase in the traditional life insurance business,
partially offset by a decrease in benefits to policyholders. These increases
were partially offset by a $3.2 million decrease in the Investment Management
Segment primarily due to lower interest expense resulting from a decrease in
assets held for sale. The decrease in the Guaranteed and Structured Financial
Products Segment of $1.3 million was largely due to a decrease in benefits to
policyholders as a result of decreased sales of single premium annuity contracts
from the comparable prior year period.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

      Consolidated income before income taxes, extraordinary item and cumulative
effect of accounting change of $913.0 million for the nine months ended
September 30, 2000 increased by $198.4 million, or 27.8%, from $714.6 million
reported in the comparable prior year period. The increase is primarily
attributable to an increase of $288.6 million in the Corporate and Other
Segment. This increase in the Corporate and Other Segment was primarily due to
an increase in realized gains in 2000 of $101.1 million, and an increase to the
class action reserve in 1999 of $140.2 million, the prior year loss from the
sale of the property and casualty business of $25.8 million, and earnings on IPO
proceeds of $13.4 million in 2000. The Investment Management Segment increased
$23.4 million, or 50.7%, primarily due to an increase in


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

management advisory fees and non-recurring fees in the timber investment
management unit, including a settlement of a lawsuit. The Asset Gathering
Segment increased by $16.7 million, or 11.5%, mainly due to an increase in net
investment income resulting from increases in invested assets backing fixed
annuity products and yields on those assets. These increases were offset by a
decrease of $120.4 million in the Guaranteed and Structured Financial Products
Segment and a $9.9 million decrease in the Protection Segment. The Guaranteed
and Structured Financial Products Segment decreased primarily due to a $106.3
million decrease in realized gains resulting from the sale of real estate in the
prior year. The Protection Segment decreased primarily due to a decrease in
realized gains in the traditional product line. The Company generated $178.0
million in net pre-tax capital gains in the nine months ended September 30, 1999
while generating $79.9 million in net pre-tax capital gains for the nine months
ended September 30, 2000. The large amount of capital gains generated in 1999
was the result of an ongoing initiative to divest the Company of its real estate
investments.

      Revenues of $6,511.6 million for the nine months ended September 30, 2000
increased $693.5 million, or 11.9%, compared to the nine months ended September
30, 1999. This increase in revenues was primarily due to an increase in the
Corporate and Other Segment of $637.6 million, primarily due to an increase of
$469.4 million, or 81.0%, in international operations attributable to the
acquisition of Aetna Canada. The Asset Gathering Segment revenues increased
$110.1 million, or 13.9%, due to a $30.6 million increase in premiums resulting
from increased sales of single premium immediate annuities, an $18.1 million
increase in management advisory fees primarily from the mutual fund business, a
$43.9 million increase in net investment income driven by the fixed annuity
business and an $11.1 million increase in variable annuity product fees.
Revenues in the Protection Segment increased $90.7 million, or 4.0%, primarily
due to the acquisition of Fortis and growth in the long-term care business in
which revenues grew by approximately $165.0 million and the non-traditional life
insurance business in which revenues grew by approximately $36.0 million.
Revenues in the Investment Management Segment increased $33.1 million, or 23.3%,
primarily due to growth in management advisory fees. Management advisory fees
increased $49.2 million due to a non-recurring fee in the timber investment
management unit. This growth in advisory fees was partially offset by a decrease
in net investment income. The non-recurring fees primarily consist of
performance based payments from the timber investment management unit's client
for restructuring a contract. Revenues in the Guaranteed and Structured
Financial Products Segment decreased $178.0 million, or 9.7%, due to a decrease
of $73.6 million in premiums attributable to single premium annuities, a $106.3
million decrease in realized gains associated with the exit from the short-term
funding agreement business (Multi-Manager), and $14.7 million in delinquent
investment income received in the comparable prior year period.

      Benefits and expenses of $5,598.6 million for the nine months ended
September 30, 2000 increased $495.1 million, or 9.7%, compared to the nine
months ended September 30, 1999. This increase in benefits and expenses was
primarily due to an increase in the Corporate and Other Segment of $349.0
million, or 38.7%, primarily driven by an increase in international operations
of $456.2 million, or 83.0%, which includes the acquisition of Aetna Canada.
Benefits and expenses in the Protection Segment increased $100.7 million, or
5.2%, and the Asset Gathering Segment increased approximately $93.4 million, or
14.4%, for the nine months ended September 30, 2000. The increase in the
Protection Segment is primarily due to the increased volume of claims paid in
the non-traditional life insurance business and increased reserve balances in
the individual long-term care business associated with lower lapses and growth
of the business. The Asset Gathering Segment increased due to an increase in
benefits on immediate annuities and interest credited, increased commission fees
incurred, and lower amortization of acquisition costs in the prior year on
revised projections of estimated gross profits. The Investment Management
Segment's increase in benefits and expenses of $9.7 million was primarily due to
an increase in interest expense of $8.8 million. Operating expenses increased as
a percentage of average assets under management from 0.23% as of September 30,
1999 to 0.28% as of September 30, 2000 primarily due to an increase in interest
expense. These increases were offset by a decrease of approximately $57.7
million in the Guaranteed and Structured Financial Products Segment. This
decrease was the result of decreased sales of single premium annuity contracts.


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations by Segment

      We operate our business in five segments. Two segments primarily serve
retail customers, two segments serve institutional customers and our fifth
segment is the Corporate and Other Segment, which includes our international
operations. Our retail segments are the Protection Segment and the Asset
Gathering Segment. Our institutional segments are the Guaranteed and Structured
Financial Products Segment and the Investment Management Segment.

      We evaluate segment performance and base management's incentives on
segment after-tax operating income, which excludes the effect of net realized
investment gains and losses and unusual or non-recurring events and
transactions. Segment after-tax operating income is determined by adjusting GAAP
net income for net realized investment gains and losses, extraordinary items,
and certain other items which we believe are not indicative of overall operating
trends. While these items may be significant components in understanding and
assessing our consolidated financial performance, we believe that the
presentation of segment after-tax operating income enhances the understanding of
our results of operations by highlighting net income attributable to the normal,
recurring operations of the business. However, segment after-tax operating
income is not a substitute for net income determined in accordance with GAAP.


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      A discussion of the adjustments to GAAP reported income, many of which
affect each operating segment, follows the table below. A reconciliation of
segment after-tax operating income, as adjusted, to GAAP reported net income
precedes each segment discussion.

<TABLE>
<CAPTION>
                                                                Three months ended        Nine months ended
                                                                  September 30,             September 30,
                                                               -------------------       -------------------
                                                                2000         1999         2000         1999
                                                               -------------------       -------------------
                                                                              (in millions)
<S>                                                            <C>          <C>          <C>          <C>
Segment Data: (1)
       Segment after-tax operating income:
          Protection Segment                                   $ 63.8       $ 48.1       $193.4       $137.3
          Asset Gathering Segment                                38.4         35.8        104.0         97.5
                                                               ------       ------       ------       ------
                  Total Retail                                  102.2         83.9        297.4        234.8
          Guaranteed and Structured Financial
               Products Segment                                  48.2         45.2        160.3        165.8
          Investment Management Segment                           7.8         10.4         40.2         27.6
                                                               ------       ------       ------       ------
                  Total Institutional                            56.0         55.6        200.5        193.4
          Corporate and Other Segment                            23.9          9.7         73.3         45.1
                                                               ------       ------       ------       ------
                  Total segment after-tax operating
                       income                                   182.1        149.2        571.2        473.3

       After-tax adjustments: (1)
          Realized investment gains (losses), net (1)            (2.7)       (42.6)        47.3        118.0
          Class action lawsuit                                     --        (52.0)          --        (91.1)
          Restructuring charges                                  (2.4)        (3.7)       (10.1)        (7.5)
          Group pension dividend transfer                          --           --          5.7           --
          Other demutualization related costs                      --           --        (10.2)          --
          Surplus tax                                             7.3         (5.9)        14.5        (17.3)
                                                               ------       ------       ------       ------
                  Total after-tax adjustments                     2.2       (104.2)        47.2          2.1

       GAAP Reported:
          Income before extraordinary item and
               cumulative effect of accounting
               change                                           184.3         45.0        618.4        475.4
          Extraordinary item - demutualization
               expenses, net of tax                                --        (25.9)       (10.2)       (56.6)
          Cumulative effect of accounting change                   --           --           --         (9.7)
                                                               ------       ------       ------       ------
               Net income                                      $184.3       $ 19.1       $608.2       $409.1
                                                               ======       ======       ======       ======
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" set forth below.

Adjustments to GAAP Reported Net Income

      Our GAAP reported net income was significantly affected by net realized
investment gains and losses and unusual or non-recurring events and transactions
presented in the reconciliation of GAAP reported net income to segment after-tax
operating income in Note 2 -- Segment Information in the notes to the unaudited
consolidated financial statements. A description of these adjustments follows:


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      In both periods, net realized investment gains and losses, except for
gains and losses from mortgage securitizations, mezzanine funds and investments
backing our short-term funding agreements, which we exited in 1999, have been
excluded from segment after-tax operating income due to their volatility between
periods and because such data are often excluded by analysts and investors when
evaluating the overall financial performance of insurers. The volatility between
periods can be impacted by fluctuations in the market, as well as by changes in
the volume of activity, which can be influenced by us and our investment
decisions. Realized investment gains and losses from mortgage securitizations,
mezzanine funds and investments backing our short-term funding agreements were
not excluded from segment after-tax operating income because we view the related
gains and losses as an integral part of the core business of those operations.

      Net realized investment gains have been reduced by: (1) amortization of
deferred policy acquisition costs to the extent that such amortization results
from realized gains and losses and (2) the portion of realized gains and losses
credited to participating pension contractholder accounts. We believe presenting
realized investment gains and losses in this format provides information useful
in evaluating our operating performance. This presentation may not be comparable
to presentations made by other insurers. Summarized below is a reconciliation of
(a) net realized investment gains per the unaudited consolidated financial
statements and (b) the adjustment made for net realized investment gains to
calculate segment after-tax operating income for the three month and nine month
periods ended September 30, 2000 and 1999.

<TABLE>
<CAPTION>
                                                           Three months ended     Nine months ended
                                                             September 30,          September 30,
                                                           -----------------      ------------------
                                                            2000       1999        2000        1999
                                                           ------     ------      ------      ------
                                                                         (in millions)
<S>                                                        <C>        <C>         <C>         <C>
Net realized investment (losses) gains                     $ (6.1)    $(70.5)     $ 73.6      $271.7

        Less amortization of deferred policy
        acquisition costs related to net realized
        investment losses (gains)                             0.7        1.6        (2.4)      (60.0)

        Less amounts charged (credited) to
        participating pension contractholder accounts         4.1        5.1         8.7       (33.7)
                                                           ------     ------      ------      ------
        Net realized investment (losses) gains, net
        of related amortization of deferred policy
        acquisition costs and amounts credited to
        participating pension contractholders per
        unaudited consolidated financial
        statements (1)                                       (1.3)     (63.8)       79.9       178.0

        Less realized investment (gains) losses
        attributable to mortgage securitizations,
        mezzanine funds and investments backing
        short-term funding agreements                        (1.1)      15.7        (3.1)       17.4
                                                           ------     ------      ------      ------
        Realized investment (losses) gains, net -
        pre-tax adjustment to calculate segment
        operating income                                     (2.4)     (48.1)       76.8       195.4

        Less income tax effect                               (0.3)       5.5       (29.5)      (77.4)
                                                           ------     ------      ------      ------
        Realized investment (losses) gains net -
        after-tax adjustment to calculate segment
        operating income                                   $ (2.7)    $(42.6)     $ 47.3      $118.0
                                                           ======     ======      ======      ======
</TABLE>

(1)   Net realized investment gains, net of related amortization of deferred
      policy acquisition costs and amounts credited to participating pension
      contractholders for the three months and nine months ended September 30,
      2000 includes $1.4 million and $1.3 million in net realized gains
      generated in the closed block, respectively. This balance is included in
      contribution from the closed block in the unaudited consolidated financial
      statements.


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      During 1997, we entered into a court approved settlement relating to a
class action lawsuit involving individual life insurance policies sold from 1979
through 1996, as specified in Note 4 - Contingencies, in the Notes to the
Unaudited Consolidated Financial Statements. In entering into the settlement, we
specifically denied any wrongdoing. The reserve held in connection with the
settlement to provide for relief to the class members for legal and
administrative costs associated with the settlement amounted to $284.4 million
and $496.6 million at September 30, 2000 and December 31, 1999, respectively. In
1999, the Company updated its estimate of the cost of claims subject to
alternative dispute resolution relief and revised its reserve estimate
accordingly. The Company recorded additional reserves related to the settlement
of $52.0 million after-tax and $91.1 million after-tax in the three and
nine-month periods ended September 30, 1999. Given the uncertainties associated
with estimating the reserve, it is reasonably possible that the final cost of
the settlement could differ materially from the amounts presently provided for
by the Company.

      The Company incurred after-tax charges for demutualization related
expenses to improve our financial analysis and financial reporting abilities.
These charges primarily included consulting fees and planning and expense
management costs. No after-tax charges for demutualization related expenses were
incurred during the three months ended September 30, 2000 and $10.2 million were
incurred during the nine months ended September 30, 2000, and no such costs were
incurred in the comparable periods of the prior year.

      The Company incurred after-tax restructuring charges to reduce costs and
increase future operating efficiency by consolidating portions of our
operations. Additional information regarding restructuring costs is included in
Note 3 -- Severance in the notes to the unaudited consolidated financial
statements. After-tax restructuring costs were $2.4 million and $10.1 million
for the three months and nine months ended September 30, 2000 and $3.7 and $7.5
million in the comparable periods of the prior year.

      During the fourth quarter of 1999, the Company recorded a $205.8 million
after-tax charge for the transfer of certain assets from the Guaranteed and
Structured Financial Products Segment to the corporate account within the
Corporate and Other Segment. The assets included investments in certain
subsidiaries and the home office real estate complex. Certain group contracts
have participating features, under which crediting rates and dividends are
affected directly by portfolio earnings. Certain participating contractholders
participate in contract experience related to net investment income and realized
capital gains and losses in the general account. These participating
contractholders were compensated for transferred assets based on the fair value
of the assets transferred. The difference between the fair value and carrying
value of the assets transferred were credited to affected participating
contractholders through crediting rates and dividends on their contracts. The
$5.7 million after-tax credit occurring in the nine months ended September 30,
2000 is a change in estimate of this transaction based on information that
became available early in 2000.

      Effective in the year 2000, the Company is no longer subject to the
surplus tax imposed on mutual life insurance companies. During the three months
ended September 30, 2000 the Company recognized a reduction in equity based
taxes of $7.3 million, resulting from a revised estimate related to prior years.
This after tax credit was excluded from after-tax operating income for the
period. The mutual company surplus tax of $5.9 million and $17.3 million has
been excluded from after-tax operating income for the three months and nine
months ended September 30, 1999.


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Retail-Protection Segment

      The following table presents certain summary financial data relating to
the Protection Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                   Three months ended         Nine months ended
                                                      September 30,             September 30,
                                                 ---------------------     -----------------------
                                                   2000        1999         2000           1999
                                                 --------     --------     --------       --------
                                                                  (in millions)
<S>                                              <C>          <C>          <C>            <C>
Revenues (1)                                     $  772.0     $  732.2     $2,322.3       $2,134.0

Benefits and expenses                               674.1        669.4      2,029.5        1,942.8

Income taxes                                         34.1         14.7         99.4           53.9
                                                 --------     --------     --------       --------

Segment after-tax operating income (1)               63.8         48.1        193.4          137.3

After-tax adjustments: (1)
Realized investment gains (losses), net (1)          (2.0)        (8.5)         7.0           69.0
Restructuring charges                                (1.8)        (3.0)        (5.4)          (3.0)
Surplus tax                                           5.5         (4.1)         8.4           (7.7)
Other demutualization related costs                    --           --         (6.7)            --
                                                 --------     --------     --------       --------
      Total after-tax adjustments                     1.7        (15.6)         3.3           58.3

GAAP Reported:
Income before extraordinary item                     65.5         32.5        196.7          195.6
Extraordinary item - demutualization
   expenses, net of tax                                --        (17.0)        (0.2)         (36.7)
                                                 --------     --------     --------       --------
      Net income                                 $   65.5     $   15.5     $  196.5       $  158.9
                                                 ========     ========     ========       ========

Other Data:
Segment after-tax operating income (loss):
   Non-traditional life (variable and
      universal life)                            $   25.7     $    8.5     $   73.8       $   56.6
   Traditional life                                  24.9         27.9         81.6           56.0
   Individual long-term care                         10.5          8.1         29.3           17.6
   Group long-term care                               3.3          4.0         10.4            9.0
   Other                                             (0.6)        (0.4)        (1.7)          (1.9)
                                                 --------     --------     --------       --------
Segment after-tax operating income (1)           $   63.8     $   48.1     $  193.4       $  137.3
                                                 ========     ========     ========       ========
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MDA.

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Segment after-tax operating income was $63.8 million for the three months
ended September 30, 2000, an increase of $15.7 million, or 32.6%, from $48.1
million reported in the comparable prior year period. Non-traditional life
insurance business after-tax operating income increased $17.2 million, or
202.4%, mainly due to improved mortality and reduced expenses. Traditional life
insurance business after-tax operating income decreased $3.0 million, or 10.8%,
mainly due to an increase in the effective tax rate as a


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

result of transferring affordable housing tax credit investments to the
Corporate & Other Segment. Individual long-term care insurance business
after-tax operating income increased $2.4 million, or 29.6%, resulting from an
increase in net investment income attributable to increases in average net
invested assets, the addition of the Fortis business and expense reduction
efforts.

      Revenues were $772.0 million for the three months ended September 30,
2000, an increase of $39.8 million, or 5.4%, from $732.2 million for the three
months ended September 30, 1999. Premiums increased $28.3 million, or 8.2%,
primarily due to an increase in individual long-term care insurance premiums,
which increased $56.5 million, or 80.1%, resulting from both additional premiums
assumed relating to the acquisition of Fortis and continued growth in the
business. Partially offsetting this increase was a decline in traditional life
insurance premiums. Net investment income increased $11.5 million, or 4.0%,
primarily due to increases in average net invested assets and portfolio yields.

      Benefits and expenses were $674.1 million for the three months ended
September 30, 2000, an increase of $4.7 million, or 0.7%, from $669.4 million
for the three months ended September 30, 1999. Benefits to policyholders
decreased $29.2 million, or 6.7%, due to improved mortality in the traditional
life insurance business, from the prior quarter's additional $24.0 million
increase in benefits from previously unreported death identified as a result of
the policyholder demutualization mailing. Other operating costs and expenses
increased $4.2 million, or 4.1%, primarily due to an increase of $16.1 million
in commissions, mainly driven by an increase in sales within the individual
long-term care business. Amortization of deferred policy acquisition costs
increased $21.5 million from $24.9 million at September 30, 1999, mainly due to
lower DAC amortization in the prior year quarter in the traditional life
business due to lower margins resulting from the $24.0 million of previously
unreported deaths identified as a result of the policyholder demutualization
mailing. Dividends increased $8.2 million, or 7.7%, due to a normal scale
increase in the traditional life insurance business. The segment's effective tax
rate on operating income was 34.8% and 23.4% for the three months ended
September 30, 2000 and 1999, respectively. This increase in the effective tax
rate was primarily due to the transfer of tax-preferenced assets to the
Corporate and Other Segment in the fourth quarter of 1999.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

      Segment after-tax operating income was $193.4 million for the nine months
ended September 30, 2000, an increase of $56.1 million, or 40.9%, from $137.3
million reported in the comparable prior year period. Non-traditional life
insurance business after-tax operating income increased $17.2 million, or 30.4%,
mainly due to an increase in net investment income resulting from higher yields
on higher net average invested assets. Traditional life insurance business
after-tax operating income increased $25.6 million, or 45.7%, primarily
resulting from a decrease in benefits to policyholders resulting form improved
mortality stemming from previously unreported death claims identified as part of
the policyholder demutualization mailing in the prior year. Individual long-term
care insurance business after-tax operating income increased $11.7 million, or
66.5%, resulting from an increase in net investment income due to growth in
average net invested assets and the addition of the Fortis business.

      Revenues were $2,322.3 million for the nine months ended September 30,
2000, an increase of $188.3 million, or 8.8%, from $2,134.0 million for the nine
months ended September 30, 1999. Premiums increased $83.0 million, or 7.9%,
primarily due to an increase in individual long-term care insurance premiums,
which increased $140.7 million, or 70.3%, resulting from both additional
premiums assumed relating to the acquisition of Fortis and continued growth in
the business. Partially offsetting this increase was a decline in traditional
life insurance premiums as a result of policy recissions associated with the
class action settlement process. Universal life and investment-type product
charges consist primarily of cost of insurance fees and separate account fees
and were $296.3 million for the nine months ended September 30, 2000, an
increase of $22.4 million, or 8.2%, from $273.9 million for the nine months
ended September 30, 1999. This increase was due primarily to growth in average
account values. Net investment income increased $83.7 million, or 10.4%,
primarily due to increases in average net invested assets and portfolio yields.

      Benefits and expenses were $2,029.5 million for the nine months ended
September 30, 2000, an increase of $86.7 million, or 4.5%, from $1,942.8 million
for the nine months ended September 30, 1999.


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Benefits to policyholders increased $16.1 million, or 1.3%, due to rapid growth
and high persistency in customer base of the individual long-term care insurance
business. Other operating costs and expenses increased $31.4 million, or 10.7%,
primarily due to an increase of $25.8 million in operating expense associated
with the individual long-term care business due to the Fortis acquisition and
growth in this business. Dividends to policyholders increased $19.4 million, or
5.8%, primarily due to normal growth of dividends on traditional life insurance
products. Amortization of deferred policy acquisition costs increased $19.8
million, or 24.4%, resulting from lower amortization of deferred acquisition
costs in the prior year due to revised projections of estimated gross profits
based upon changes in estimated future interest margins and mortality margins.
The Segment's effective tax rate on operating income was 33.9% and 28.2% for the
nine months ended September 30, 2000 and 1999, respectively. This increase in
the effective tax rate was primarily due to the transfer of tax-preferenced
assets to the Corporate and Other Segment in the fourth quarter of 1999.


                                       34
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Retail-Asset Gathering Segment

      The following table presents certain summary financial data relating to
the Asset Gathering Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                  Three months ended        Nine months ended
                                                     September 30,            September 30,
                                                 -------------------       -------------------
                                                  2000         1999         2000         1999
                                                 ------       ------       ------       ------
                                                                (in millions)
<S>                                              <C>          <C>          <C>          <C>
Revenues (1)                                     $297.2       $267.8       $894.1       $788.5

Benefits and expenses                             239.5        212.2        738.4        642.0

Income taxes                                       19.3         19.8         51.7         49.0
                                                 ------       ------       ------       ------

Segment after-tax operating income (1)             38.4         35.8        104.0         97.5

After-tax adjustments: (1)
Realized investment gains (losses), net (1)         2.6         (1.8)         6.3          3.5
Other demutualization related costs                  --           --         (1.4)          --
Restructuring charges                              (0.4)        (0.7)        (1.4)        (4.5)
Surplus tax                                         0.4         (0.1)         0.5         (0.7)
                                                 ------       ------       ------       ------
        Total after-tax adjustments                 2.6         (2.6)         4.0         (1.7)

GAAP Reported:
Income before extraordinary item                   41.0         33.2        108.0         95.8
Extraordinary item - demutualization
    expenses, net of tax                             --         (3.6)        (0.1)        (7.6)
Cumulative effect of accounting change               --           --           --         (9.6)
                                                 ------       ------       ------       ------
        Net income                               $ 41.0       $ 29.6       $107.9       $ 78.6
                                                 ======       ======       ======       ======

Other Data:
Segment after-tax operating income (loss):
        Annuity                                  $ 25.3       $ 24.0       $ 70.9       $ 57.2
        Mutual funds                               13.4         12.1         35.5         39.6
        Other                                      (0.3)        (0.3)        (2.4)         0.7
                                                 ------       ------       ------       ------
Segment after-tax operating income (1)           $ 38.4       $ 35.8       $104.0       $ 97.5
                                                 ======       ======       ======       ======
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Segment after-tax operating income was $38.4 million for the three months
ended September 30, 2000, an increase of $2.6 million, or 7.3%, from $35.8
million reported in the comparable prior year period. Annuity business after-tax
operating income was $25.3 million for the three months ended September 30,
2000, an increase of $1.3 million, or 5.4%, primarily due to higher investment
income in fixed annuities on higher invested assets and increased spreads.
Spreads increased 22 basis points to 2.28% for the three months ended September
30, 2000 from 2.06% for the three months ended September 30, 1999. The average
interest credited rate increased 32 basis points to 5.80% from 5.48%, while the
earned interest rate


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

increased 54 basis points to 8.08% from 7.54%. Mutual funds after-tax operating
income increased $1.3 million, or 10.7%, primarily due to lower operating
expenses offset partially by lower asset based fees as a result of a decrease in
average assets under management of 0.4%.

      Revenues were $297.2 million for the three months ended September 30,
2000, an increase of $29.4 million, or 11.0%, from $267.8 million reported for
the comparable prior year period. The increased revenue was due to higher
premiums and net investment income arising in the fixed annuity business. The
increase in premium is due to increased sales of single premium immediate
annuities. Net investment income was $111.5 million for the three months ended
September 30, 2000, an increase of $15.6 million, or 16.3%, from $95.9 million
reported in the comparable prior year period. Net investment income increased
primarily due to growth in invested assets backing fixed annuity products. In
addition to asset growth, the average investment yield on invested assets
backing fixed annuity products increased 54 basis points to 8.08% for the three
months ended September 30, 2000 from 7.54% reported in the comparable prior year
period, reflecting higher market interest rates on new fixed income investments.
Investment-type product charges were $33.2 million for the three months ended
September 30, 2000, an increase of $0.8 million, or 2.5%, from $32.4 million
reported for the comparable prior year period. The increase in investment-type
product fees is primarily due to growth in average variable annuity separate
account liabilities.

      Investment management revenues, commissions, and other fees were $132.1
million for the three months ended September 30, 2000, a decrease of $2.5
million, or 1.9%, from $134.6 million for the comparable prior year period.
Average mutual fund assets under management was $32,579.9 million for the three
months ended September 30, 2000, a decrease of $117.6 million or 0.4%, from
$32,697.5 million reported in the comparable prior year period, primarily due to
redemptions in fixed income funds and the financial sector funds. Net deposits
for the three months ended September 30, 2000 were $145.1 million compared to
net redemptions of $966.9 million reported in the comparable prior year period,
an improvement of $1,112.0 million. The net deposit position of the funds
business for the period is primarily due to aggressive marketing of both retail
and institutional investment management services in addition to the launch of a
multi-sector fund in September 2000 and lower redemptions from our financial
sector funds and private managed accounts from the prior year. Investment
advisory fees were $50.3 million for the three months ended September 30, 2000,
a decrease of $1.2 million, or 2.3% from $51.5 million reported in the
comparable prior year period and were 0.62% and 0.63% of average mutual fund
assets under management for the three months ended September 30, 2000 and 1999,
respectively. Underwriting and distribution fees increased $2.0 million, or
2.9%, to $70.3 million for the three months ended September 30, 2000 primarily
due to an increase in front-end load charge mutual fund sales and accordingly,
commission income. Shareholder service and other fees were $11.7 million for the
three months ended September 30, 2000 compared to $12.9 million reported in the
comparable prior year period, primarily reflecting lower assets under
management.

      Benefits and expenses increased $27.3 million, or 12.9%, to $239.5 million
for the three months ended September 30, 2000 from $212.2 million reported in
the comparable prior year period. Benefits to policyholders increased $34.2
million, or 56.2%, primarily due to an increase in benefits paid on immediate
annuities. The increase in benefits on immediate annuities is driven by the
success the company has had in developing this business; premiums on immediate
annuities increased $15.2 million, or 310.2% during the three months ended
September 30, 2000 compared to the same period in the prior year. In addition,
benefits to policyholders increased $11.0 million due to timing of adjustments
to reserves in the third quarter of 1999. Other operating costs and expenses
decreased $6.4 million, or 4.8%, to $126.9 million for the three months ended
September 30, 2000 from $133.3 million reported in the comparable prior year
period. The decrease was primarily due to the decrease in operating expenses in
the mutual fund business resulting from an expense management program. In
addition, other operating costs and expenses decreased due to additional
deferrals of acquisition costs primarily driven by variable annuities. These
decreases were partially offset by an increase in commission expense primarily
due to increased sales in the annuities business. Amortization of deferred
policy acquisition costs decreased $0.5 million, or 2.8%, to $17.5 million for
the three months ended September 30, 2000 from $18.0 million reported in the
comparable prior year period. The Segment's effective tax rate on operating
income was 33.4% and 35.6% for the three months ended September 30, 2000 and
1999, respectively. This decrease in the effective tax rate is primarily due to
the investments in tax-preferenced assets in the annuities business.



                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

      Segment after-tax operating income was $104.0 million for the nine months
ended September 30, 2000, an increase of $6.5 million, or 6.7%, from $97.5
million reported in the comparable prior year period. Annuity business after-tax
operating income was $70.9 million for the nine months ended September 30, 2000,
an increase of $13.7 million, or 24.0%, primarily due to higher investment
income in fixed annuities on increased invested assets and spreads and an
increase in variable annuity product charges, resulting from higher average
account balances. Fixed annuity spreads increased 24 basis points to 2.28% for
the nine months ended September 30, 2000 from 2.04% for the nine months ended
September 30, 1999. The average interest credited rate increased 21 basis points
to 5.74% from 5.53%, while the earned interest rate increased 46 basis points to
8.02% from 7.56%. Mutual funds after-tax operating income decreased $4.1
million, or 10.4%, primarily due to lower asset based fees of $9.7 million as a
result of a decrease in average assets under management of 3.5%. This was offset
by lower operating expenses of $6.3 million due to an expense management
program.

      Revenues were $894.1 million for the nine months ended September 30, 2000,
an increase of $105.6 million, or 13.4%, from $788.5 million reported for the
comparable prior year period. The increased revenue was due to higher premiums
in the annuities business, higher net investment income arising in the fixed
annuity business, higher investment-type product charges arising in variable
annuity business, and higher commissions revenue on front-end load charge mutual
fund sales. Premiums increased $30.6 million, or 300.0%, to $40.8 million due to
increased sales of single premium immediate annuities in the fixed annuity
business. Net investment income was $327.3 million for the nine months ended
September 30, 2000, an increase of $43.9 million, or 15.5%, from $283.4 million
reported in the comparable prior year period. Net investment income increased
primarily due to increases in invested assets backing fixed annuity products and
yields on those assets. The average investment yield on invested assets backing
fixed annuity products was 8.02% for the nine months ended September 30, 2000
compared to 7.56% reported in the comparable prior year period, reflecting
higher market interest rates on new fixed income investments. Investment-type
product charges were $103.1 million for the nine months ended September 30,
2000, an increase of $13.3 million, or 14.8%, from $89.8 million reported for
the comparable prior year period. The increase in investment-type product fees
is primarily due to growth in average variable annuity separate account
liabilities, which increased 13.8% to $7,717.6 million for the nine months ended
September 30, 2000 from $6,781.5 million reported in the comparable prior year
period. Mortality and expense fees as a percentage of average account balances
were 1.35% and 1.41% for the nine months ended September 30, 2000 and 1999,
respectively.

      Investment management revenues, commissions, and other fees were $421.9
million for the nine months ended September 30, 2000, an increase of $18.1
million, or 4.5%, from $403.8 million for the comparable prior year period.
Average mutual fund assets under management was $32,641.6 million for the nine
months ended September 30, 2000, a decrease of $1,178.0 million, or 3.5%, from
$33,819.6 million reported in the comparable prior year period, primarily due to
redemptions in fixed income funds and the financial sector funds. Net
redemptions for the nine months ended September 30, 2000 were $219.3 million
compared to $2,348.4 million reported in the comparable prior year period, an
improvement of $2,129.1 million, or 90.7%, primarily due to aggressive marketing
of both retail and institutional investment management services in addition to
the launch of the multi-sector fund in September 2000 and lower redemptions from
our financial sector funds and private managed accounts from the prior year.
Investment advisory fees were $145.6 million for the nine months ended September
30, 2000, a decrease of $7.7 million, or 5.0%, from $153.3 million reported in
the comparable prior year period and were 0.59% and 0.60% of average mutual fund
assets under management for the nine months ended September 30, 2000 and 1999,
respectively. Underwriting and distribution fees increased $26.5 million, or
12.4%, to $240.8 million for the nine months ended September 30, 2000 primarily
due to the increase in front-end load charge mutual fund sales and accordingly,
commission revenue. The increase in front-end load charges was partially offset
by a decrease in deferred sales charges due to improved retention of existing
accounts. Shareholder service and other fees were $35.5 million for the nine
months ended September 30, 2000 compared to $37.5 million reported in the
comparable prior year period, primarily reflecting lower assets under
management.


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Benefits and expenses increased $96.4 million, or 15.0%, to $738.4 million
for the nine months ended September 30, 2000 from $642.0 million reported in the
comparable prior year period. Benefits to policyholders increased $58.5 million,
or 28.4%, primarily due to an increase in benefits paid on immediate annuities
and interest credited on fixed annuity account balances. Benefits paid on
immediate annuities is the result of the Company's success in this area of the
business, premiums on immediate annuities increased $30.6 million, or 300.0%,
for the nine months ended September 30, 2000. Interest credited on fixed annuity
account balances increased primarily due to higher average account balances. In
addition, benefits to policyholders increased $11.0 million due to timing of
adjustments to reserves in the comparable prior year period. Other operating
costs and expenses increased $25.5 million, or 6.5%, to $420.0 million for the
nine months ended September 30, 2000 from $394.5 million reported in the
comparable prior year period. The increase was primarily due to the increase in
commission fees incurred in the mutual fund business, primarily the result of
increased front-end load charge mutual fund sales. In addition, other operating
costs and expenses increased due to increases in commission expense in the
Signator Financial Network and in the annuities business. These increases in
other operating costs were partially offset by additional deferrals of
acquisition expenses in the annuities business. Amortization of deferred policy
acquisition costs increased $12.4 million, or 30.1%, to $53.6 million for the
nine months ended September 30, 2000 from $41.2 million reported in the
comparable prior year period. This increase in amortization is primarily due to
higher profits in the current period and revised projections of estimated gross
profits based upon increases in estimated future interest margins in the
comparable prior year period. The Segment's effective tax rate on operating
income was 33.2% and 33.4% for the nine months ended September 30, 2000 and
1999, respectively.


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Institutional-Guaranteed and Structured Financial Products Segment

      The following table presents certain summary financial data relating to
the Guaranteed and Structured Financial Products Segment for the periods
indicated.

<TABLE>
<CAPTION>
                                                   Three months ended        Nine months ended
                                                      September 30,            September 30,
                                                 ---------------------     -----------------------
                                                   2000         1999         2000           1999
                                                 --------     --------     --------       --------
                                                                  (in millions)
<S>                                              <C>          <C>          <C>            <C>
Revenues (1)                                     $  492.1     $  487.0     $1,699.2       $1,750.2

Benefits and expenses                               418.7        420.4      1,454.8        1,509.7

Income taxes                                         25.2         21.4         84.1           74.7
                                                 --------     --------     --------       --------

Segment after-tax operating income (1)               48.2         45.2        160.3          165.8

After-tax adjustments: (1)
Realized investment gains (losses), net (1)         (11.3)       (25.1)       (24.4)          55.7
Restructuring charges                                (0.1)          --         (2.3)            --
Other demutualization related costs                    --           --         (1.7)            --
Group pension dividend transfer                        --           --          5.7             --
Surplus tax                                           4.0         (0.6)         5.5           (3.8)
                                                 --------     --------     --------       --------
        Total after-tax adjustments                  (7.4)       (25.7)       (17.2)          51.9

GAAP Reported:
Income before extraordinary item                     40.8         19.5        143.1          217.7
Extraordinary item - demutualization
    expenses, net of tax                               --         (4.2)        (0.2)         (10.0)
                                                 --------     --------     --------       --------
        Net income                               $   40.8     $   15.3     $  142.9       $  207.7
                                                 ========     ========     ========       ========

Other Data:
Segment after-tax operating income (loss):
          Spread-based products:
            GICs and funding agreements          $   32.2     $   26.3     $  100.8       $  110.6
            Single premium annuities                  7.7          8.8         34.2           25.3
          Fee-based products                          8.3         10.1         25.3           29.9
                                                 --------     --------     --------       --------
Segment after-tax operating income (1)           $   48.2     $   45.2     $  160.3       $  165.8
                                                 ========     ========     ========       ========
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Segment after-tax operating income was $48.2 million for the three months
ended September 30, 2000, an increase of $3.0 million, or 6.6%, from $45.2
million reported in the comparable prior year period. In December 1999, the
Company exited the short-term funding agreement business. The short-term funding
agreement business generated $4.7 million in after-tax operating loss for the
three months ended September 30, 1999. Spread-based products after-tax operating
income was $39.9 million, an increase of $4.8 million or 13.7%, from $35.1
million reported in the comparable prior year period. The increase


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

reflects growth in the portfolio which was somewhat offset by the receipt of
$5.4 million of non-recurring investment income in 1999. Fee-based products
after-tax operating income was $8.3 million, a decrease of $1.8 million, or
17.8%, from $10.1 million reported in the comparable prior year period primarily
due to the release of the risk reserve on a maturing contract in the comparable
prior year period partially offset by lower operating expenses in the current
period.

      Revenues increased $5.1 million, or 1.0%, to $492.1 million for the three
months ended September 30, 2000 from $487.0 million reported in the comparable
prior year period, largely due to $19.0 million of investment losses in the
exited short-term funding agreement product in the comparable prior year period
partially offset by lower premiums in spread-based products in the current
period. Single premium annuity premiums decreased $24.8 million to $5.0 million
as compared to the prior year period. Terminal funding premiums decreased by
$5.8 million to $15.3 million from the comparable prior period and structured
settlement premiums increased $10.2 million to $11.0 million from the comparable
prior period, when sales were initiated. Investment-type product charges were
$15.7 million for the three months ended September 30, 2000, a decrease of $2.4
million, or 13.3%, primarily due to lower expense recoveries from participating
contracts and the absence of non-recurring fees received in the comparable prior
year period. Investment-type product charges were 0.54% and 0.62% of average
fee-based policy reserves for the three months ended September 30, 2000 and
1999, respectively. Net investment income increased $3.7 million, or 0.9%, for
the three months ended September 30, 2000 compared to the prior year period.
Average invested assets backing spread-based products decreased $635.7 million,
or 3.5% to $17,560.0 million for the three months ended September 30, 2000 from
$18,195.7 million reported in the comparable prior year period largely due to
the exiting of the short-term funding agreement business at the end of 1999. The
impact on net investment income due to the lower asset base was more than offset
by the average investment yield on these invested assets which increased to
8.59% for the three months ended September 30, 2000 compared to 7.89% reported
in the prior year period, reflecting the reinvestment of proceeds from
lower-yielding fixed maturities into relatively higher-yielding securities, and
absence of the loss on the now discontinued short-term funding agreement
business.

      Benefits and expenses decreased $1.7 million, or 0.4%, to $418.7 million
for the three months ended September 30, 2000 from $420.4 million reported in
the comparable prior year period. The decrease was largely due to a $12.8
million decrease in benefits to policyholders as a result of decreased sales of
single premium annuity contracts from the comparable prior year period. Interest
credited on account balances for spread-based products was $298.7 million for
the three months ended September 30, 2000, an increase of $6.7 million, or 2.3%,
from $292.0 million reported in the comparable prior year period. The increase
in interest credited was experienced even though there was a decrease in average
account balances for spread-based products of $761.7 million to $16,699.1
million for the three months ended September 30, 2000 from $17,460.8 million
reported in the comparable prior year period. The decrease in account balances
resulted from the exiting of the short-term funding agreement business in 1999.
The impact of the reduced asset level was more than offset by an increase in the
average interest credited rate on account balances for spread-based products,
which was 7.28% for the three months ended September 30, 2000 compared to 6.80%
reported in the prior year period. The increase in the average interest credited
rate on account balances for spread-based products was primarily due to general
increases in interest rates and their impact on new contracts and on existing
contracts that are subject to resets of crediting rates. Other operating costs
and expenses were $19.2 million for the three months ended September 30, 2000,
an increase of $5.3 million, or 38.1%, from $13.9 million reported in the
comparable prior year period. The increase was largely the result of higher
taxes, licenses, and fees, which added $2.1 million and higher commissions,
which added $1.0 million as compared to the comparable prior year period.
Dividends of $10.9 million for the three months ended September 30, 2000,
increased $3.9 million, or 55.7%, from $7.0 million reported in the comparable
prior year period, reflecting a higher level of distributable surplus in
participating contractholder accounts. The Segment's effective tax rate on
operating income was 34.3% and 32.1% for the three months ended September 30,
2000 and 1999, respectively. This increase in the effective tax rate is
primarily due to the transfer of tax-preferenced assets to the Corporate and
Other Segment.


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

      Segment after-tax operating income was $160.3 million for the nine months
ended September 30, 2000, a decrease of $5.5 million, or 3.3%, from $165.8
million reported in the comparable prior year period. In December 1999, the
Company exited the short-term funding agreement business. The short-term funding
agreement business generated $13.2 million in after-tax operating income for the
nine months ended September 30, 1999. Spread-based products after-tax operating
income was $135.0 million, a decrease of $0.9 million, or 0.7%, from $135.9
million reported in the comparable prior year period, primarily due to the
elimination of the short-term funding agreement product at the end of 1999,
partially offset by the impact of $17.3 million of delinquent bond interest
received in 1999. Fee-based products after-tax operating income was $25.3
million, a decrease of $4.6 million, or 15.4%, from $29.9 million reported in
the comparable prior year period primarily due to the receipt of non-recurring
fees in the prior year, partially offset by lower operating expenses in the
current year.

      Revenues decreased $51.0 million, or 2.9%, to $1,699.2 million for the
nine months ended September 30, 2000 from $1,750.2 million reported in the
comparable prior year period, largely due to a $86.9 million decrease in
premiums and investment product fees partially offset by a $35.9 million
increase in investment income and investment gains. Single premium annuity
premiums decreased $116.8 million as compared to the prior year period that
experienced one very large sale. Terminal funding premiums improved by $2.2
million from the comparable prior period and structured settlement premiums
contributed $30.2 million. This product was not sold until the last half of
1999. Investment-type product charges were $50.0 million for the nine months
ended September 30, 2000, a decrease of $13.1 million, or 20.8%, primarily due
to lower expense recoveries from participating contracts and the absence of
non-recurring fees received in the comparable prior year period. Investment-type
product charges were 0.55% and 0.69% of average fee-based policy reserves for
the nine months ended September 30, 2000 and 1999, respectively. Net investment
income increased $16.0 million, or 1.3%, for the nine months ended September 30,
2000 compared to the prior year period, primarily as a result of a higher
average investment yield on invested assets backing spread-based products. The
average investment yield on these invested assets increased to 8.66% for the
nine months ended September 30, 2000 compared to 8.22% reported in the prior
year period, reflecting the reinvestment of proceeds from lower-yielding fixed
maturities into relatively higher-yielding securities, and losses in the
short-term funding agreement business which the Company exited in the comparable
prior year period. Partially offsetting the effect of increased yield was a
decline in the level of average invested assets backing spread-based products of
$417.9 million, or 2.4% to $16,767.5 million for the nine months ended September
30, 2000 from $17,185.4 million reported in the comparable prior year period.
The decline in the average invested assets reflects the elimination of the
short-term funding agreement product at the end of 1999.

      Benefits and expenses decreased $54.9 million, or 3.6%, to $1,454.8
million for the nine months ended September 30, 2000 from $1,509.7 million
reported in the comparable prior year period. The decrease was largely due to a
$73.6 million decrease in benefits to policyholders as a result of decreased
sales of single premium annuity contracts. Partially offsetting the impact of
decreased sales, interest credited on account balances for spread-based products
was $853.5 million for the nine months ended September 30, 2000, an increase of
$22.3 million, or 2.7%, from $831.2 million reported in the comparable prior
year period. The increase in interest credited was experienced even though there
was a decrease in average account balances for spread-based products of $465.0
million to $16,028.0 million for the nine months ended September 30, 2000 from
$16,493.0 million reported in the comparable prior year period. The net decrease
in account balances resulted from the exiting of the short-term funding
agreement business in 1999 partially offset by growth in other spread-based
business. The impact of the reduced asset level was more than offset by an
increase in the average interest credited rate on account balances for
spread-based products, which was 7.16% for the nine months ended September 30,
2000 compared to 6.79% reported in the prior year period. The increase in the
average interest credited rate on account balances for spread-based products was
primarily due to general increases in interest rates and their impact on new
contracts and on existing contracts that are subject to resets of crediting
rates. Other operating costs and expenses were $52.5 million for the nine months
ended September 30, 2000, a decrease of $10.1 million, or 16.1%, from $62.6
million reported in the comparable prior year period. The decrease was largely
the result of the settlement of a tax audit issue, which resulted in lower
interest costs, and lower systems expenses related to projects completed during
1999. Dividends of $29.2 million for the nine months ended September 30, 2000,
increased $14.2 million, or 94.7%, from $15.0 million reported in the


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

comparable prior year period, reflecting a higher level of distributable surplus
in participating contractholder accounts. The Segment's effective tax rate on
operating income was 34.4% and 31.1% for the nine months ended September 30,
2000 and 1999, respectively. This increase in the effective tax rate is
primarily due to the transfer of tax-preferenced assets to the Corporate and
Other Segment.


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Institutional-Investment Management Segment

      The following table presents certain summary financial data relating to
the Investment Management Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                Three months ended      Nine months ended
                                                   September 30,          September 30,
                                                 -----------------      ------------------
                                                  2000       1999        2000        1999
                                                 ------     ------      ------      ------
                                                               (in millions)
<S>                                              <C>        <C>         <C>         <C>
Revenues (1)                                     $ 45.4     $ 52.4      $173.3      $141.7

Benefits and expenses                              32.0       35.3       105.4        95.8

Income taxes                                        5.6        6.7        27.7        18.3
                                                 ------     ------      ------      ------

Segment after-tax operating income (1)              7.8       10.4        40.2        27.6

After-tax adjustments: (1)
Realized investment gains (losses), net (1)         0.7       (0.6)        1.0         0.1
                                                 ------     ------      ------      ------
        Total after-tax adjustments                 0.7       (0.6)        1.0         0.1

GAAP Reported:
Income before extraordinary item                    8.5        9.8        41.2        27.7
Cumulative effect of accounting change               --         --          --        (0.1)
                                                 ------     ------      ------      ------
        Net income                               $  8.5     $  9.8      $ 41.2      $ 27.6
                                                 ======     ======      ======      ======
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Segment after-tax operating income was $7.8 million for the three months
ended September 30, 2000, a decrease of $2.6 million, or 25.0%, from $10.4
million reported in the comparable prior year period. The decrease was primarily
due to the inclusion of approximately $2.0 million in gains on the
securitization of mortgage loans during 1999; there was no securitization in
2000.

      Revenues decreased $7.0 million, or 13.2%, to $45.4 million for the three
months ended September 30, 2000 from $52.4 million reported in the comparable
prior year period. Net investment income was $7.0 million for the three months
ended September 30, 2000, a decrease of $2.7 million from $9.7 million reported
in the comparable prior year period. This decrease in net investment income was
primarily due to a $2.7 million allocation of equity interest in collaterialized
bond obligations to the other business segments purchasing the assets.
Investment management revenues, commissions, and other fees decreased $0.6
million, or 1.5%, for the three months ended September 30, 2000, primarily due
to a decrease in mortgage origination and servicing fees, which decreased $0.9
million to $0.7 million for the three months ended September 30, 2000 compared
to $1.6 million reported in the prior year. Investment advisory fees were $38.6
million for the three months ended September 30, 2000 compared to $38.4 million
in 1999. Investment advisory fees were 0.43% and 0.39% of average advisory
assets under management in 2000 and 1999, respectively. There were no realized
investment gains for the three months ended September 30, 2000 compared to $3.3
million for the three months ended September 30, 1999.


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Benefits and expenses were $32.0 million for the three months ended
September 30, 2000, a decrease of $3.3 million, or 9.3%, from $35.3 million
reported in the comparable prior year period. This decrease was driven primarily
by lower interest expense of $2.7 million due to a decrease in assets held for
sale. Operating expenses were 0.35% and 0.34% of average advisory assets under
management in 2000 and 1999, respectively. The Segment's effective tax rate on
operating income was 41.8% and 39.2% for the three months ended September 30,
2000 and 1999, respectively. The effective tax rate for the Institutional
Investment Management Segment is higher than the other business segments due to
the state tax on certain subsidiaries.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

      Segment after-tax operating income was $40.2 million for the nine months
ended September 30, 2000, an increase of $12.6 million, or 45.7%, from $27.6
million reported in the comparable prior year period. The increase was primarily
due to higher investment advisory fees.

      Revenues increased $31.6 million, or 22.3%, to $173.3 million for the nine
months ended September 30, 2000 from $141.7 million reported in the comparable
prior year period. Net investment income was $17.3 million for the nine months
ended September 30, 2000, a decrease of $16.0 million from $33.3 million
reported in the comparable prior year period. This decrease in net investment
income was partially due to the purchase of equity interest in collateralized
bond obligations by the other business segments of $23.4 million. Offsetting
this decrease was a $3.6 million increase in interest income on mortgages held
for sale. Investment management revenues, commissions, and other fees increased
$49.2 million, or 46.9%, for the nine months ended September 30, 2000, primarily
due to an increase in investment advisory fees, which increased $50.2 million to
$149.7 million for the nine months ended September 30, 2000 compared to $99.5
million reported in the prior year period. The increase in investment advisory
fees was primarily due to $45.3 million in incentive fee receipts in connection
with the restructuring of timber management contracts and $15.3 million in
performance fees earned by the mezzanine fund manager. Investment advisory fees
were 0.54% and 0.32% of average advisory assets under management in 2000 and
1999, respectively. Mortgage origination and servicing fees were $4.4 million
for the nine months ended September 30, 2000 compared to $5.4 million in 1999.
Realized investment gains decreased $1.3 million for the nine months ended
September 30, 2000, primarily due to lack of securitization activity in 2000.

      Benefits and expenses were $105.4 million for the nine months ended
September 30, 2000, an increase of $9.6 million, or 10.0%, from $95.8 million
reported in the comparable prior year period. The increase was primarily due to
$15.2 million in incentive compensation payments related to the receipt of the
incentive fees on timber management contracts and $8.7 million in performance
fees paid for the management of the mezzanine fund. Offsetting these increases
was a $14.3 million transfer of expenses on equity interest in collateralized
bond obligations to the other business segments owning these assets. The
Segment's effective tax rate on operating income was 40.8% and 39.9% for the
nine months ended September 30, 2000 and 1999, respectively. The effective tax
rate for the Institutional Investment Management Segment is higher than our
other business segments due to the state tax on certain subsidiaries.


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Corporate and Other Segment

      The following table presents certain summary financial data relating to
the Corporate and Other Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                   Three months ended         Nine months ended
                                                      September 30,             September 30,
                                                 ---------------------     -----------------------
                                                   2000         1999         2000           1999
                                                 --------     --------     --------       --------
                                                                   (in millions)
<S>                                              <C>          <C>          <C>            <C>
Revenues (1)                                     $  424.4     $  242.3     $1,344.7       $  808.3

Benefits and expenses                               396.0        228.1      1,248.5          728.9

Income taxes                                          4.5          4.5         22.9           34.3
                                                 --------     --------     --------       --------

Segment after-tax operating income (1)               23.9          9.7         73.3           45.1

After-tax adjustments: (1)
Realized investment gains (losses), net (1)           7.3         (6.6)        57.4          (10.3)
Class action lawsuit, net of tax                       --        (52.0)          --          (91.1)
Restructuring charges                                (0.1)          --         (1.0)            --
Other demutualization related costs                    --           --         (0.4)            --
Surplus tax                                          (2.6)        (1.1)         0.1           (5.1)
                                                 --------     --------     --------       --------
        Total after-tax adjustments                   4.6        (59.7)        56.1         (106.5)

GAAP Reported:
Income (loss) before extraordinary item              28.5        (50.0)       129.4          (61.4)
Extraordinary item - demutualization
    expenses, net of tax                               --         (1.1)        (9.7)          (2.3)
                                                 --------     --------     --------       --------
        Net income (loss)                        $   28.5     $  (51.1)    $  119.7       $  (63.7)
                                                 ========     ========     ========       ========
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

      Segment after-tax operating income from international operations was $9.2
million for the three months ended September 30, 2000, an increase of $1.5
million from $7.7 million reported in the comparable prior year period. The
increase in international operation's after-tax operating income was primarily
due to The Maritime Life Assurance Company, a Canadian subsidiary, where
improvements in the group insurance business, and the results of Aetna Canada,
which was acquired on October 1, 1999, contributed to the improvement in
after-tax operating income despite the inclusion of goodwill amortization,
acquisition related costs from preferred dividends, interest on debt and
integration expenses.

      Segment after-tax operating income from corporate operations was $11.7
million for the three months ended September 30, 2000, an increase of $17.4
million from a loss of $5.7 million reported in the comparable prior year
period. During the fourth quarter of 1999, a corporate account was formed and
all corporate type assets were moved from the business units to the Corporate
and Other Segment. As part of this move, the group pension participating
contractholders were reimbursed at fair market value for these assets. Because
of this transaction, there is no longer a need to calculate the participating
policyholders' share of the change in these assets. As a result, segment
after-tax operating income reported in the comparable prior year period includes
a charge for this item versus none for the three months ended


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

September 30, 2000, an improvement of $5.5 million. After tax income from
corporate activity increased by $7.0 million after tax primarily the result of
investment income from growth in the corporate account asset base. Tax benefits,
related primarily to low income housing credits, increased by $2.6 million.

      Segment after-tax operating income from non-core businesses was $3.0
million for the three months ended September 30, 2000, a decrease of $4.7
million from $7.7 million reported in the comparable prior year period. This
decrease relates primarily to the finalization of the accounting for the sales
of our property and casualty subsidiaries that resulted in operating gains in
the third quarter of 1999.

      The effective tax rate on operating income for the Corporate and Other
Segment was 15.8% and 31.7% for the three months ended September 30, 2000 and
1999, respectively. This rate decreased primarily due to the transfer of
tax-preferenced assets into the Corporate and Other Segment.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

      Segment after-tax operating income from international operations was $19.9
million for the nine months ended September 30, 2000, an increase of $2.1
million from $17.8 million reported in the comparable prior year period. The
increase in international operation's after-tax operating income was primarily
due to The Maritime Life Assurance Company, a Canadian subsidiary, where
improvements in the group insurance business, and the results of Aetna Canada,
which was acquired on October 1, 1999, contributed to the improvement in
after-tax operating income despite the inclusion of goodwill amortization,
acquisition related costs from preferred dividends, interest on debt and
integration expenses.

      Segment after-tax operating income from corporate operations was $47.5
million for the nine months ended September 30, 2000, an increase of $27.9
million from $19.6 million reported in the comparable prior year period. During
the fourth quarter of 1999, a corporate account was formed and all corporate
type assets were moved from the business units to the Corporate and Other
Segment. As part of this move, the group pension participating contractholders
were reimbursed at fair market value for these assets. Because of this
transaction, there is no longer a need to calculate the participating
policyholders' share of the change in these assets. As a result, segment
after-tax operating income reported in the comparable prior year period includes
a charge for this item versus none for the nine months ended September 30, 2000,
an improvement of $13.7 million. Tax benefits, related primarily to low income
housing credits, increased by $18.2 million. Market valuation adjustments
related to the corporate owned life insurance program decreased $5.3 million
compared to the comparable prior year period.

      The effective tax rate on operating income for the Corporate and Other
Segment was 23.8% and 43.2% for the nine months ended September 30, 2000 and
1999, respectively. This rate decreased primarily due to the transfer of
tax-preferenced assets into the Corporate and Other Segment.


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

General Account Investments

      On the effective date of the Plan of Reorganization, the Company's
invested assets were allocated between the closed block and operations outside
the closed block. In view of the similar asset quality characteristics of the
major asset categories in the two portfolios, the invested assets in the closed
block have been combined with the Company's invested assets outside the closed
block for purposes of the following discussion and analysis.

Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $50.2 billion and
$48.7 billion as of September 30, 2000 and December 31, 1999, respectively. The
portfolio composition has not significantly changed at September 30, 2000 as
compared to December 31, 1999. The following table shows the composition of
investments in our general account portfolio.

<TABLE>
<CAPTION>
                                            As of September 30,         As of December 31,
                                                    2000                       1999
                                         -----------------------------------------------------
                                         Carrying           % of      Carrying           % of
                                           Value            Total       Value            Total
                                         -----------------------------------------------------
                                               (in millions)                 (in millions)
<S>                                      <C>                <C>       <C>                <C>
      Fixed maturity securities (1)      $31,696.0           63.1%    $30,869.9           63.5%
      Mortgage loans (2)                  10,893.6           21.7      10,736.4           22.0
      Real estate                            538.7            1.1         548.5            1.1
      Policy loans (3)                     1,950.1            3.9       1,938.8            4.0
      Equity securities                    1,457.9            2.9       1,316.2            2.7
      Other invested assets                1,128.1            2.2       1,311.1            2.7
      Short-term investments                 187.7            0.4         166.9            0.3
      Cash and cash equivalents (4)        2,366.1            4.7       1,817.9            3.7
                                         ---------          -----     ---------          -----
          Total invested assets          $50,218.2          100.0%    $48,705.7          100.0%
                                         =========          =====     =========          =====
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $699.9 million and
      $631.9 million as of September 30, 2000 and December 31, 1999,
      respectively. Carrying value is composed of investments categorized as
      'held-to-maturity,' which are carried at amortized cost, and investments
      categorized as 'available-for-sale,' which are carried at fair value. The
      total fair value of our fixed maturity security portfolio was $31,446.9
      and $30,518.0 million, at September 30, 2000 and December 31, 1999,
      respectively.
(2)   The fair value for our mortgage loan portfolio was $11,059.6 and $10,685.2
      million as of September 30, 2000 and December 31, 1999, respectively.
(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.
(4)   Cash and cash equivalents are included in total invested assets in the
      table above for the purposes of calculating yields on the income producing
      assets for the Company. Cash and cash equivalents are not considered part
      of Total Investments of the Company of $47,852.1 million and $46,887.8
      million at September 30, 2000 and December 31, 1999, respectively. Closed
      block Total Investments of $7,073.7 million as of September 30, 2000 are
      presented in closed block assets on the Consolidated Balance Sheets but
      remain part of the Company's total invested assets.

      Consistent with the nature of our product liabilities, our assets are
heavily oriented toward fixed maturity securities. We determine the allocation
of our assets primarily on the basis of cash flow and return requirements of our
products and secondarily by the level of investment risk.

Fixed Maturity Securities. Our fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities ('ABS')
and mortgage-backed securities ('MBS'), with the balance invested in government
bonds. Our fixed maturity securities portfolio also includes redeemable
preferred stock. As of September 30, 2000, fixed maturity securities represented
63.1% of general account investment assets with a carrying value of $31.7
billion, roughly comprised of 52% public securities and 48% private securities.
Each year we direct


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the majority of our net cash inflows into investment grade fixed maturity
securities. We typically invest between 10% and 15% of funds allocated to fixed
maturity securities in below-investment-grade bonds. Allocations are based on
our assessment of relative value and the likelihood of enhancing risk-adjusted
portfolio returns. While the general account has profited from the
below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to total invested assets.

      The following table shows the composition by issuer of our fixed maturity
securities portfolio.

                     Fixed Maturity Securities -- By Issuer

<TABLE>
<CAPTION>
                                                               As of September 30,          As of December 31,
                                                                      2000                         1999
                                                            ------------------------------------------------------
                                                             Carrying          % of       Carrying           % of
                                                               Value           Total        Value            Total
                                                            ------------------------------------------------------
                                                          (in millions)                 (in millions)
<S>                                                         <C>                <C>        <C>                <C>
      Corporate securities ...........................      $24,798.4           78.2%     $23,590.4           76.4%
      MBS/ABS ........................................        5,075.5           16.0        5,288.4           17.1
      U.S. Treasury securities and obligations of
           U.S. government agencies ..................          146.1            0.5          297.3            1.0
      Debt securities issued by foreign
           governments ...............................        1,552.6            4.9        1,560.2            5.1
      Obligations of states and political
           subdivisions ..............................          123.4            0.4          133.6            0.4
                                                            ---------          -----      ---------          -----
                Total ................................      $31,696.0          100.0%     $30,869.9          100.0%
                                                            =========          =====      =========          =====
</TABLE>

      Our MBS and ABS holdings, in keeping with our investment philosophy of
tightly managing interest rate risk, are heavily concentrated in commercial MBS
where the underlying loans are largely call protected, which means they are not
pre-payable without penalty prior to maturity at the option of the issuer,
rather than in residential MBS where the underlying loans have no call
protection. By investing in MBS and ABS securities with relatively predictable
repayments, we add high quality, liquid assets to our portfolios without
incurring the risk of excessive cash flow in periods of low interest rates or a
cash flow deficit in periods of high interest rates. We believe the portion of
our MBS/ABS portfolio subject to prepayment risk as of September 30, 2000 and
December 31, 1999 was limited to 3.6% and 3.9% of our total MBS/ABS portfolio
and 0.6% and 0.7% of our total fixed maturity securities holdings, respectively.


                                       48
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Results

      The following table summarizes the Company's investment results for the
periods indicated. The general account's portfolio yield, net of investment
expenses, increased from the three months and nine months ended September 30,
1999. The improved yield was benefited by favorable interest rates achieved on
our 1999 and year-to-date 2000 fixed maturity security acquisitions. In
particular, bond acquisitions since the first quarter of 1999 have benefited
from a combination of higher U.S. Treasury rates and widening spreads in both
the public and private sectors. Indicative of the increase in investment yields,
between March 31, 1999 and September 30, 2000, yields on BBB/Baa 10-year public
bonds rose 125 basis points to 7.93%. Additionally, our real estate sales
program in 1999 contributed to the lower level of investment expenses in the
current period.

<TABLE>
<CAPTION>
                                                 Three months ended                              Nine months ended
                                                    September 30,                                   September 30,
                                   ------------------------------------------------------------------------------------------------
                                          2000                    1999                      2000                    1999
                                   Yield      Amount       Yield        Amount       Yield       Amount      Yield        Amount
                                   ------------------------------------------------------------------------------------------------
                                           (in millions)            (in millions)            (in millions)             (in millions)
<S>                                <C>      <C>             <C>       <C>             <C>      <C>             <C>      <C>
General account assets-excluding
policy loans
  Gross income                     8.20%    $   992.1       8.00%     $   919.1       8.41%    $ 2,997.9       8.26%    $ 2,768.8
  Ending assets-excluding policy
    loans                                    48,268.2                  45,623.8                 48,268.2                 45,623.8
Policy loans
  Gross income                     5.73%         27.9       5.89%          28.1       6.03%         87.9       5.84%         82.9
Ending assets                                 1,950.1                   1,905.7                  1,950.1                  1,905.7
  Total gross income               8.11%      1,020.0       7.92%         947.2       8.32%      3,085.8       8.16%      2,851.7
    Less: investment expenses                   (68.3)                    (83.1)                  (206.2)                  (270.7)
                                            ---------                 ---------                ---------                ---------
      Net investment income        7.57%    $   951.7       7.22%     $   864.1       7.76%    $ 2,879.6       7.39%    $ 2,581.0
                                            =========                 =========                =========                =========
</TABLE>

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the cash requirements of business operations. Historically, our
principal cash flow sources have been premiums, deposits and charges on policies
and contracts, investment income, maturing investments, and proceeds from sales
of investment assets. In addition to the need for cash flow to meet operating
expenses, our liquidity requirements relate principally to the liabilities
associated with our various life insurance, annuity, and structured investment
products and to the funding of investments in new products, processes, and
technologies. Our product liabilities include the payment of benefits under life
insurance, annuity and structured investment products and the payment of policy
surrenders, withdrawals and policy loans.

      Net cash provided by operating activities was $815.8 million and $827.8
million for the nine months ended September 30, 2000 and 1999, respectively. The
decrease in the nine months ended September 30, 2000 compared to 1999 resulted
primarily from the cash transferred to the closed block of $158.6 million. This
decrease was partially offset by an increase in net income of $199.1 million and
depreciation and amortization of $25.0 million during the nine months ended
September 30, 2000 compared to the prior year period.

      Net cash used in investing activities was $1,070.5 million and $2,710.0
million for the nine months ended September 30, 2000 and 1999, respectively. The
decrease in cash used in the nine months ended September 30, 2000 as compared to
1999 resulted from more acquisitions of fixed maturities classified as available
for sale than sales of these assets during the prior year period. As part of a
prior year initiative to reduce real estate holdings, the Company generated
$1,191.8 million in cash from investing activities


                                       49
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

during the nine months ended September 30, 1999. Due to the success of the
divestment initiative in 1999 only $49.5 million in cash was generated in the
sales of real estate during the nine months ended September 30, 2000. In
addition, the Company's exit from the short-term funding agreement business in
1999 resulted in lower uses of cash for investing activities during the nine
months ended September 30, 2000. These decreases in cash generated from
investing activities were partially offset by the receipt of $141.3 million as
part of the acquisition of Fortis' long-term care business.

      Net cash provided by financing activities was $473.9 million and $1,071.7
million for the nine months ended September 30, 2000 and 1999, respectively. The
decrease in the nine months ended September 30, 2000 as compared to 1999
resulted from lower levels of universal life and investment-type contract
deposits and higher withdrawals on these vehicles. In addition, a significant
use of cash during the nine months ended September 30, 2000 was the cash
payments of $1,067.7 million to policyholders as a result of demutualization.
These decreases in cash flows from financing were partially offset by proceeds
from the issuance of common stock in the Company's IPO of $1,657.7 million
during the nine months ended September 30, 2000.

      On October 26, 2000, the Company announced that its Board of Directors has
authorized a stock repurchase program, with no termination date, under which the
Company will purchase up to $500.0 million of its outstanding common stock.
Under the stock repurchase program, purchases will be made from time to time,
depending on market conditions, business opportunities and other factors, in the
open market or through privately negotiated transactions, and which may be, if
deemed appropriate, through a systematic program. Through November 10, 2000 the
Company has repurchased 100,000 shares with a total cost of $2.8 million.

      Based on current trends the Company expects to generate sufficient
positive operating cash to meet all short-term and long-term cash requirements.
The Company maintains a high degree of liquidity within the investment portfolio
in fixed maturity investments, common stock and short-term investments. In
addition, cash flow requirements also are supported by a $1,000 million
committed line of credit under an agreement dated August 3, 2000 which replaces
two $500 million lines of credit previously in place. The new line of credit
agreement provides for two facilities: one for $500 million pursuant to a 364
day commitment (subject to renewal) and a second for $500 million pursuant to a
five year facility. The line of credit is available for general corporate
purposes. The line of credit agreement contains various covenants, among these
being that shareholders' equity meet certain requirements. To date, we have not
borrowed any amounts under the line of credit.

      The Company is finalizing the documentation of a commercial paper program
which will provide for the issuance of up to $1.0 billion of commercial paper by
John Hancock Financial Services, Inc. This program is expected to be in place
before the end of the year and will ultimately replace the commercial paper
program now in place at its indirect subsidiary, John Hancock Capital
Corporation.

Important Factors that May Affect Future Results

      The following are some of the factors that could affect our future
results. They should be considered in connection with evaluating forward-looking
statements contained in this report and otherwise made by us or on our behalf,
because these factors could cause actual results and conditions to differ
materially from those projected in forward-looking statements.

      Our future results are subject to risks and uncertainties including, but
not limited to, the risks that (1) a significant downgrade in our ratings for
claims-paying ability and financial strength may lead to policy and contract
withdrawals and materially harm our ability to market our products; (2)
elimination of Federal tax benefits for our products and other changes in laws
and regulations (including in particular possible repeal of the Federal Estate
Tax) may adversely affect sales of our insurance and investment advisory
products; (3) as a holding company, we will depend on dividends from our
subsidiaries and the Massachusetts insurance law may restrict ability of John
Hancock Life Insurance Company to pay dividends to us; (4) we face increasing
competition in our retail and institutional businesses from mutual fund
companies, banks and investment management firms as well as from other insurance
companies; (5) a


                                       50
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

decline or increased volatility in the securities markets, and other economic
factors, may adversely affect our business, particularly our variable life
insurance, mutual fund, variable annuity and investment business; (6) our life
insurance sales are highly dependent on a third party distribution relationship;
(7) customers may not be responsive to new or existing products or distribution
channels, (8) interest rate volatility may adversely affect our profitability;
(9) our net income and revenues will suffer if customers surrender annuities and
variable and universal life insurance policies or redeem shares of our open-end
mutual funds; (10) the independent directors of our variable series trusts and
of our mutual funds could reduce the compensation paid to us or could terminate
our contracts to manage the funds; (11) under our Plan of Reorganization, we
were required to establish the closed block, a special arrangement for the
benefit of a group of our policyholders, and we may have to fund deficiencies in
our closed block, and any over-funding of the closed block will benefit only the
holders of policies included in the closed block, not our stockholders; (12)
there are a number of provisions in our Plan of Reorganization, our Restated
Certificate of incorporation and by-laws, laws applicable to us, agreements that
we have entered into with our senior management, and our stockholder rights
plan, that will prevent or discourage takeovers and business combinations that
our stockholders might otherwise consider to be in their best interests; (13) we
will face losses if the claims on our insurance products, or reductions in rates
of mortality on our annuity products, are greater than we projected; (14) we
face risks relating to our investment portfolio; (15) the market price of our
common stock may decline if persons who received common stock as compensation in
the reorganization sell their stock in the public market; (16) we may experience
volatility in net income due to changes in standards for accounting for
derivatives and other changes; (17) our United States insurance companies are
subject to risk-based capital requirements and possible guaranty fund
assessments; (18) the National Association of Insurance Commissioners'
codification of statutory accounting practices may adversely affect the
statutory surplus of John Hancock Life Insurance Company; (19) we may be unable
to retain personnel who are key to our business; (20) we face risks from assumed
reinsurance business in respect of personal accident insurance and the
occupational accident component of workers compensation insurance; (21)
litigation and regulatory proceedings may result in financial losses, harm our
reputation and divert management resources, and (22) we face unforeseen
liabilities arising from our acquisitions and dispositions of businesses.

      Readers are also directed to other risks and uncertainties discussed, as
well as to further discussion of the risks described above, in other documents
filed by the Company with the Securities and Exchange Commission. The Company
specifically disclaims any obligation to update or revise any forward-looking
information, whether as a result of new information, future developments, or
otherwise.


                                       51
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Markets Risk Management

      The Company maintains a disciplined, comprehensive approach to managing
capital market risks inherent in its business operations. To mitigate these
risks, and effectively support Company objectives, investment operations are
organized and staffed to focus investment management expertise on specific
classes of investments, with particular emphasis placed on private placement
markets. In addition, a dedicated unit of asset/liability risk management (ALM)
professionals centralizes the implementation of its interest rate risk
management program. As an integral component of its ALM program, derivative
instruments are used in accordance with risk reduction techniques established
through Company policy and with formal approval granted from the New York
Insurance Department. The Company's use of derivative instruments is monitored
on a regular basis by senior management and reviewed quarterly with the
Committee of Finance of the Company's wholly-owned subsidiary, John Hancock Life
Insurance Company, ("the Company's Committee of Finance").

      The Company's principal capital market exposures are credit and interest
rate risk, although we have certain exposures to changes in equity prices and
foreign currency exchange rates. Credit risk pertains to the uncertainty
associated with the ability of an obligor or counterparty to continue to make
timely and complete payments of contractual principal and/or interest. Interest
rate risk pertains to the market value fluctuations that occur within fixed
maturity securities or liabilities as market interest rates move. Equity and
foreign currency risk pertain to price fluctuations, associated with the
Company's ownership of equity investments or non-US dollar denominated
investments, driven by dynamic market environments.

Credit Risk

      The Company manages the credit risk inherent in its fixed maturity
securities by applying strict credit and underwriting standards, with specific
limits regarding the proportion of permissible below investment grade holdings.
We also diversify our fixed maturity securities with respect to investment
quality, issuer, industry, geographical, and property-type concentrations. Where
possible, consideration of external measures of creditworthiness, such as
ratings assigned by nationally recognized rating agencies, supplement our
internal credit analysis. The Company uses simulation models to examine the
probability distribution of credit losses to ensure that it can readily
withstand feasible adverse scenarios. In addition, the Company periodically
examines, on various levels of aggregation, its actual default loss experience
on significant asset classes to determine if the losses are consistent with the
(1) levels assumed in product pricing, (2) ACLI loss experience and (3) rating
agencies' quality-specific cohort default data. These tests have generally found
the Company's aggregate experience to be favorable relative to these external
benchmarks and consistent with priced-for-levels.

      As of September 30, 2000, the Company's fixed maturity portfolio was
comprised of 86.0% investment grade securities and 14.0% below-investment-grade
securities. These percentages are consistent with recent experience and
indicative of the Company's long-standing investment philosophy of pursuing
moderate amounts of credit risk in return for higher expected returns. We
believe that credit risk can be successfully managed given our proprietary
credit evaluation models and experienced personnel.

Interest Rate Risk

      The Company maintains a tightly controlled approach to managing its
potential interest rate risk. Interest rate risk arises from many of our primary
activities, as we invest substantial funds in interest-sensitive assets to
support the issuance of our various interest-sensitive liabilities, primarily
within our Protection, Asset Gathering and Guaranteed & Structured Financial
Products Segments.

      We manage interest rate sensitive segments of our business, and their
supporting investments, under one of two broadly defined risk management methods
designed to provide an appropriate matching of assets and liabilities. For
guaranteed rate products, where contractual liability cash flows are highly
predictable (e.g., GICs or immediate annuities) we apply sophisticated
duration-matching techniques to manage the segment's exposure to both parallel
and non-parallel yield curve movements. Typically this


                                       52
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

management technique involves a duration mismatch tolerance of only +/- .05
years, with other measures used for limiting exposure to non-parallel risk. For
non-guaranteed rate products, such as whole life insurance or single premium
deferred annuities, liability cash flows are less predictable. Therefore, a
conventional duration-matching strategy is less effective at managing the
inherent risk. For these products, we manage interest rate risk based on
scenario-based portfolio modeling that seeks to identify the most appropriate
investment strategy given probable policyholder behavior and liability crediting
needs under a wide range of interest rate environments.

      As of September 30, 2000, there have been no material changes to the
interest rate exposures as reported in the Company's 1999 Form 10-K.

Derivative Instruments

      The Company uses a variety of derivative financial instruments, including
swaps, caps, floors, and exchange traded futures contracts, in accordance with
Company policy. Permissible derivative applications include the reduction of
economic risk (i.e., hedging) related to changes in yields, price, cash flows,
and currency exchange rates. In addition, certain limited applications of
"income generation" are allowed. Examples of this type of use include the
purchase of call options to offset the sale of embedded options in Company
liability issuance or the purchase of swaptions to offset the purchase of
embedded put options in certain investments. The Company does not make a market
or trade derivatives for the purpose of speculation.

      The Company's Investment Compliance Unit monitors all derivatives activity
for consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions as of
September 30, 2000. The notional amounts in the table represent the basis on
which pay or receive amounts are calculated and are not reflective of credit
risk. These exposures represent only a point in time and will be subject to
change as a result of ongoing portfolio and risk management activities.

<TABLE>
<CAPTION>
                                                          As of September 30, 2000
                                 -------------------------------------------------------------------------------
                                                                                       Fair Value
                                                                  ----------------------------------------------
                                                 Weighted-
                                  Notional     Average Term        -100 Basis           As of        +100 Basis
                                   Amount         (Years)         Point Change         9/30/00      Point Change
                                   ------      ------------       ------------         -------      ------------
                                                  (in millions, except for Weighted-Average Term)
<S>                              <C>                 <C>           <C>                <C>              <C>
Interest rate swaps ........     $10,313.1           8.2           $(194.8)           $(100.3)         $(1.1)
CMT swaps ..................         509.3           1.7              (6.2)              (6.0)          (5.7)
Futures contracts (1) ......       1,505.3          11.1             (67.3)              (0.8)          62.9
Interest rate caps .........         321.6           5.9               1.4                3.6            7.6
Interest rate floors .......       8,328.0           9.7              48.5               16.9            6.1
Swaptions ..................          30.3           4.7              (1.5)              (0.6)          (0.2)
                                 ---------                         -----------------------------------------
      Totals ...............     $21,007.3           8.8           $(219.9)           $ (87.2)         $69.6
                                 =========                         =========================================
</TABLE>

----------
(1)   Represents the notional value on open contracts as of September 30, 2000.

      Our non-exchange-traded derivatives are exposed to the possibility of loss
from a counterparty failing to perform its obligations under terms of the
derivative contract. We believe the risk of incurring losses due to
nonperformance by our counterparties is remote. To manage this risk, Company
procedures include the (a) on-going evaluation of each counterparty's credit
ratings, (b) the application of credit limits and monitoring procedures based on
an internally developed, scenario-based, risk assessment system, (c) monthly
reporting of each counterparty's "potential exposure", (d) master netting
agreements and, where appropriate, (e) collateral agreements. Futures contracts
trade on organized exchanges and, therefore, have effectively no credit risk.


                                       53
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

PART II OTHER INFORMATION

ITEM 5. OTHER INFORMATION

2001 Annual Meeting - Shareholder Proposals

      Although the Board of Directors has not yet taken action to set the date
for the Company's 2001 Annual Meeting of stockholders, the Company expects that
the meeting will be held on May 14, 2001. Accordingly, any proper proposal which
a stockholder wishes to have included in the Board's proxy statement and form of
proxy for the 2001 Annual Meeting should be received by the Secretary of the
Company by December 26, 2000. Such proposals must meet the requirements set
forth in the rules and regulations of the SEC in order to be eligible for
inclusion in the proxy statement for the 2001 Annual Meeting. In addition to the
SEC rules concerning stockholder proposals, the Company's By-Laws establish
advance notice procedures as to: (1) business to be brought before an annual
meeting of stockholders other than by or at the direction of the Board of
Directors; and (2) the nomination, other than by the Board of Directors or a
committee appointed by the Board of Directors, of candidates for election as
directors. Any stockholder who wishes to submit a proposal to be acted upon at
the 2001 Annual Meeting or who wishes to nominate a candidate for election as
director must deliver written notice of such stockholder's intent to the
Secretary of the Company not earlier than January 15, 2001 and not later than
February 13, 2001 in accordance with the By-Laws. A copy of these By-Law
provisions may be obtained by written request addressed to the Secretary of the
Company. Correspondence to the Secretary of the Company should be addressed to:
Secretary, John Hancock Financial Services, Inc., John Hancock Place, Post
Office Box 111, Boston, Massachusetts 02117-0111.

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

(a) Exhibits

Exhibit
Number                   Description
------                   -----------

27                Financial Data Schedule

-----------

b) Reports on Form 8-K.

There were no reports on Form 8-K required to be filed during the period covered
by this report.


                                       54
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                           JOHN HANCOCK FINANCIAL SERVICES, INC.

Date:  November 13, 2000                       By: /s/ Thomas E. Moloney
                                                   -----------------------------
                                            Thomas E. Moloney
                                            Chief Financial Officer


                                       55
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                                  EXHIBIT INDEX

Exhibit
Number                 Description
------                 -----------

27                Financial Data Schedule

--------------


                                       56